Fortnightly - BChttp://www.fortnightly.com/tags/bc
enVendor Neutralhttp://www.fortnightly.com/fortnightly/2012/05/vendor-neutral
<div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Vendor Neutral</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - May 2012</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1205-VEN-pic1.jpg" width="1080" height="719" alt="SNC-Lavalin and Aecon Construction are replacing pressure tubes and feeder pipes at the four Darlington nuclear reactors." title="SNC-Lavalin and Aecon Construction are replacing pressure tubes and feeder pipes at the four Darlington nuclear reactors." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1205-VEN-pic4.jpg" width="785" height="700" alt="CPUC directed California IOUs to negotiate contracts with Calpine’s Sutter plant." title="CPUC directed California IOUs to negotiate contracts with Calpine’s Sutter plant." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1205-VEN-pic3.jpg" width="1075" height="719" alt="Puget Sound Energy began operating the 343-MW Lower Snake River wind project." title="Puget Sound Energy began operating the 343-MW Lower Snake River wind project." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1205-VEN-pic2.jpg" width="983" height="747" alt="IKEA commissioned Blink EV charging stations at a ninth store location in the Western U.S." title="IKEA commissioned Blink EV charging stations at a ninth store location in the Western U.S." /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><b>Entergy Louisiana</b> starts construction on gas-fired power project; <b>Virginia Commonwealth University</b> and <b>Dominion</b> partner on a test site for efficient energy technologies; <b>Burlington Electric Department</b> selects <b>Siemens</b> for meter data management platform; IKEA commissions four <b>Blink</b> electric vehicle charging stations; <b>Edison Mission Energy</b>, <b>TIAA-CREF</b> and <b>Cook Inlet Region Inc.</b> form partnership, and others.</p>
<h4>Generation</h4>
<p><b>Entergy Louisiana</b> started construction at a $721 million gas-fired power project in Westwego, La., per recent approval by the <b>Louisiana Public Service Commission</b>. Shaw Group is building Ninemile Unit 6, a 550-MW dual-fuel, combined-cycle unit at its existing Ninemile Point station, under an engineering, procurement and construction (EPC) contract. Entergy Louisiana will own 55 percent of the capacity and energy output of the unit, while Entergy Gulf States Louisiana and Entergy New Orleans, respectively, have contracted to purchase 25 percent and 20 percent of the capacity and output for the life of the units. The plant is expected to start up in the first part of 2015. </p>
<p><b>Calpine </b>agreed to supply <b>Western Farmers Electric Cooperative </b>(WFEC) with capacity and power from the Oneta Energy Center (OEC) from June 1, 2014, through 2035. Under the contract, WFEC initially will purchase 160 MW of Oneta’s capacity, an amount increasing to 280 MW from 2019 through 2035. Conditions of the contract include securing satisfactory transmission service.</p>
<p><b>Southern California Edison </b>(SCE) received a confirmatory action letter from the Nuclear Regulatory Commission’s (NRC), which outlines actions SCE must complete at the San Onofre nuclear generating station before seeking permission to restart Units 2 and 3. SCE recently submitted a letter to the NRC describing a series of actions it’s taking regarding steam generator issues at San Onofre. An NRC inspection team has been on site conducting inspections since March 19. Unit 3 has been shut down since January 31, when it was taken off line after station operators detected a leak in one of the unit’s steam generator tubes. Unit 2 was taken out of service for a planned outage on January 9.</p>
<p>The City of West Palm Beach, Florida, contracted <b>EMCOR Group</b> subsidiary <b>Poole &amp; Kent </b>to build a new power plant at its existing operating water treatment plant. The scope of work includes providing standby diesel generators and associated switchgear, fuel storage, and balance-of-plant systems.</p>
<p><b>Ontario Power Generation </b>(OPG) awarded a $600 million, two-phase contract to replace major components of the four reactors at Darlington nuclear generating station to a joint venture of <b>SNC-Lavalin Nuclear</b> and <b>Aecon Construction</b>. The project involves removing and replacing the 480 pressure tubes and calandria tubes and 960 feeder pipes for each of the station’s four reactors. The refurbishment is part of Ontario’s long-term energy plan, which will involve retrofits and replacements at numerous plants.</p>
<p><b>The California Public Utilities Commission </b>(CPUC) is taking action to keep the Sutter Energy Center operating through 2012. The CPUC directed PG&amp;E, Southern California Edison, and San SDG&amp;E to negotiate contracts with the 10 year-old Sutter plant in Yuba City, while the CPUC finalizes changes to its resource adequacy program. Calpine, owner of the plant, told the CPUC in November 2011 that it was planning on retiring the plant in 2012 due to a lack of a resource adequacy contract. The California Independent System Operator (ISO) predicted that the Sutter plant will be needed to help integrate renewable resources and phase out older, dirtier plants by 2017. </p>
<p><b>Puget Sound Energy</b> began operating the Lower Snake River wind facility, Washington’s largest wind farm. PSE began building the 343-MW project in May 2010 with lead contractor <b>Renewable Energy Systems </b>(RES) Americas and turbine manufacturer <b>Siemens Energy</b>.</p>
<p><b>Westinghouse</b> affirmed that it will seek <b>Department of Energy </b>(DOE) funding to support small modular reactor (SMR) technologies. According to a final opportunity announcement issued on March 22, the DOE plans to consider SMR applications that incorporate passive safety features and that can be licensed expeditiously, achieving a commercial operation date on a domestic site by 2022. Up to $452 million in funding is available.</p>
<p><b>DC Water</b> contracted <b>Pepco Energy Services</b> to design, build and operate a combined heat and power (CHP) plant at<b> </b>DC Water’s Blue Plains wastewater treatment plant. Pepco says the $81 million project will be the first in North America to use biogas from a water treatment facility. It will produce at least 14 MW of electric power to supply the Blue Plains facility with nearly 30 percent of its power demand. In addition to designing and building the CHP plant, Pepco will provide on-site operations and maintenance services valued at more than $89 million over the 15-year contract term. The overall project is valued at approximately $170 million. Construction will begin in August and is due to be completed in December 2014. </p>
<p><b>NRG Energy</b> contracted <b>First Solar</b> to build NRG’s 26 MW (AC) Avra Valley solar project near Tucson, Ariz. Electricity from the Avra Valley solar project will be sold to Tucson Electric Power under a 20-year power purchase agreement. Construction began at the end of March and First Solar expects to complete Avra Valley by the end of 2012.</p>
<p><b>Southwest Solar Technologies </b>signed a joint development agreement with <b>MaxQ Power Conversion LLC</b>, an affiliate of MaxQ Technology of Tempe, Ariz. Under the Agreement, the parties will cooperate to develop and manufacture Southwest Solar’s concentrating photovoltaic (CPV) module with MaxQ’s closed-loop liquid cooling system.<b> </b></p>
<h4>Smart Grid</h4>
<p><b>Alameda County</b> and <b>Chevron Energy Solutions</b> joined federal, state and local officials to unveil a microgrid that enables the county’s Santa Rita Jail to sustain power should its connection to the utility grid be interrupted. The $11.7 million project provides backup power and is expected to save the county about $100,000 a year in energy costs. The facility requires 3 MW of electricity to maintain daily operations and ensure the safety of the inmates and staff. The self-sustaining microgrid integrates several renewable energy projects implemented at the jail, including solar photovoltaic panels, a 1 MW fuel-cell cogeneration plant, and wind turbines, along with a 2 MW advanced energy storage system. Chevron built the project, which was funded in part by the U.S. Department of Energy, the California Energy Commission (CEC), and the California Public Utilities Commission. The CEC provided nearly $2 million in funding for the project through its Public Interest Energy Research (PIER) program.</p>
<p><b>Virginia Commonwealth University</b> and <b>Dominion</b> partnered to use the VCU School of Engineering’s West Hall as a five-year test site for efficient energy technologies and research as a microgrid project. Dominion experts, VCU engineering faculty and facilities management personnel, and third-party products and services providers will work together to implement continuous, real-time energy adjustments to the building, lights and equipment. It’s expected to reduce energy costs by $20,000, or 4 percent, annually. VCU and Dominion will split the $500,000 cost of the project, which includes installing hardware, control systems, and solar panels, to enable both parties to gather voltage data and analyze energy volume, timing, and emissions, and to establish energy usage trends and equipment performance.</p>
<h4>Metering</h4>
<p><b>Burlington Electric Department</b>, a municipal department of the City of Burlington, Vt., selected <b>Siemens</b> to implement an eMeter EnergyIP meter data management (MDM) platform. BED and several other Vermont utilities worked together with the state of Vermont to secure smart grid investment grant funding through the <i>American Recovery and Reinvestment Act</i> (ARRA). The scoping phase of the Burlington project began in mid-2011, and the second phase will include meter-to-cash functionality, advanced billing functionality, and operational improvements through reduced truck rolls and better outage management. In the future Burlington plans to implement the eMeter EnergyEngage consumer web portal and new energy efficiency programs.</p>
<p><b>Consumers Energy</b> selected a team of vendors and service providers to implement an advanced metering system for its 1.8 million electric customers in Michigan. <b>GE Energy</b> will provide metering hardware; <b>SmartSynch</b> will provide a celluar-based smart grid platform; <b>Grid Net</b> will provide networking and metering software; <b>Qualcomm</b> will provide mobile broadband chipsets; and <b>Verizon Wireless</b> will provide the communications network. Meter installation is scheduled to begin in Muskegon County in August 2012 with installation phases continuing through 2019.</p>
<h4>EVs &amp; Storage</h4>
<p>The<b> California Public Utilities Commission</b> and <b>NRG Energy</b> entered an agreement for NRG to build a comprehensive electric vehicle (EV) charging network in California, investing about $100 million over the next four years. The fee-based charging network will consist of at least 200 publicly available fast-charging stations—installed in the San Francisco Bay area, the San Joaquin Valley, the Los Angeles Basin, and San Diego County—with chargers that can add 50 miles of range in less than 15 minutes of charging. NRG also will provide the wiring for at least 10,000 individual charging stations located at homes, offices, multifamily communities, schools, and hospitals across the state. The agreement, pending approvals and finalization, resolves outstanding litigation arising from a long-term electricity contract entered more than a decade ago by a subsidiary of Dynegy, then a co-owner with NRG of the portfolio of power generating plants now owned by NRG in California.</p>
<p><b>EV Connect</b> helped the City of <b>Sacramento</b> increase its modern EV charging facilities and moved the state capital toward compliance with the state’s clean-car mandate, requiring one of every seven new cars sold in the state in 2025 to be a zero-emission vehicle. In addition, EV Connect has been deploying residential charge stations for new EV owners in the Sacramento area who took advantage of rebates and other incentives offered by the state. The company expects to do more work getting property owners EV ready, as automakers begin selling more electric and plug-in hybrid vehicles in California in order to reach the state’s 15.4 percent goal.</p>
<p><b>IKEA</b> commissioned four <b>Blink</b> electric vehicle charging stations at its Tempe, Ariz., store as part of its partnership with <b>ECOtality</b>. This initiative represents the ninth such project for IKEA in the United States, with the eight other locations also in the Western U.S. ECOtality is the project manager of the EV Project, a public-private partnership funded in part by an ARRA grant, to provide infrastructure to support the deployment of EVs.</p>
<h4>Transactions</h4>
<p><b>Exelon </b>and <b>Constellation Energy</b> completed their merger, effective March 12. The merger makes Chicago-based Exelon the largest investor owned utility in the United States, serving a total load of about 164 TWh per year, across 1 million residential and 100,000 commercial, industrial, and public sector customers. Exelon has operations and business activities in 47 states, the District of Columbia, and Canada. The company also has one of the nation’s largest power generation fleets, with approximately 35,000 MW of owned power generation, including more than 19,000 MW of nuclear power—which makes it the largest nuclear generator in the United States.</p>
<p><b>American Electric Power</b> and its unregulated subsidiary <b>AEP Retail Energy</b> acquired <b>BlueStar Energy Holdings </b>and its independent retail electric supplier BlueStar Energy Solutions. Chicago-based BlueStar supplies retail customers in Ohio, Illinois, and other deregulated electricity markets, and provides energy solutions, including demand response and energy efficiency services, nationwide. The company has been operating since 2002 and has more than 23,000 customer accounts.</p>
<p><b>NextEra Energy Resources</b> acquired two solar photovoltaic (PV) projects totaling 40 MW (AC) in St. Clair, Ontario, from <b>First Solar</b>. The projects began commercial operation in February 2012. The power is being sold to the Ontario Power Authority via long-term contracts under its renewable energy standard offer program.</p>
<p><b>Sumitomo Corp.</b> became a 50-50 equity partner in two large-scale wind farms that <b>Duke Energy Renewables</b> is building in Kansas. Sumitomo is buying a 50 percent stake in the 131-MW Cimarron II Windpower Project in Gray County, and the 168-MW Ironwood Windpower Project in Ford County. The projects are under construction and are expected to start operating later this year. Duke Energy Renewables will operate and maintain the projects. In addition, the companies are exploring opportunities to finance construction and operations. Both projects have 20-year contracts in place to sell output; <b>Kansas City Power &amp; Light</b> will purchase electricity and associated renewable energy credits (RECs) from Cimarron II and <b>Westar Energy</b> will buy all the power and RECs produced by the Ironwood wind farm. </p>
<p><b>Edison Mission Energy</b>, <b>TIAA-CREF</b>, and<b> Cook Inlet Region Inc. </b>formed<b> Capistrano Wind Partners</b>, a partnership to support and fund wind energy in North America, specifically by acquiring wind projects from <b>Edison Mission Group</b> (EMG). EMG companies currently own and operate a portfolio of 31 wind projects in commercial operation or under construction in 11 states with a generating capacity of nearly 2,000 MW. All wind projects in the Capistrano portfolio are expected to have long-term power sales agreements in place with electric utilities and will be operational at the time of investment. EMG will manage and retain an equity interest. Initial projects in the portfolio include the 61-MW Mountain Wind I and 80-MW Mountain Wind II projects, both located in Wyoming, as well as the 150-MW Cedro Hill project in Texas. Projects to be acquired when they become operational include the 42-MW Crofton Bluffs project and the 80-MW Broken Bow project, both under construction in Nebraska. Capistrano plans to acquire additional projects from EMG in the future, eventually up to seven projects totaling 500 MW. TIAA-CREF and CIRI committed $460 million of capital to the partnership, which includes an up-front investment of $238 million to acquire the first three operating wind projects.</p>
<p><b>Algonquin Power Co.</b>, Algonquin Power &amp; Utilities Corp’s renewable power generation subsidiary, agreed to acquire a 480-MW portfolio of four wind power projects in the United States from <b>Gamesa Corporación Tecnológica, S.A.</b> for $888 million. The portfolio consists of four facilities, Minonk (200 MW), Senate (150 MW), Pocahontas Prairie (80 MW) and Sandy Ridge (50 MW) located in the states of Illinois, Texas, Iowa and Pennsylvania, respectively. Pocahontas Prairie and Sandy Ridge began operating in February 2012, and Senate and Minonk are in construction with startup anticipated in late 2012. The projects are comprised of 240 Gamesa G9X-2.0 MW wind turbines. Gamesa is contracted to provide operations, warranty, and maintenance services for the wind turbines and balance of plant facilities for 20 years.</p>
<p><b>First Wind</b> obtained $236 million in financing for its 69 MW Kawailoa wind project on Kamehameha Schools’ Kawailoa Plantation lands on Oahu’s north shore. The project obtained a $220 million non-recourse construction and term loan and $16 million in letters of credit. <b>Union Bank</b> served as administrative agent and joint lead arranger, along with Bayern LB, Rabobank, and Siemens Financial Services. CIBC and CoBank also participated in the financing. Early construction work began in December 2011 and is expected to be completed by the end of 2012. Major construction work, including delivery and erection of turbines, is expected to begin this summer. First Wind says that once complete, the project will be the largest wind energy facility in Hawaii.</p>
<h4>Transmission</h4>
<p><b>ITC Transmission</b> selected <b>Quanta Services </b>Michigan<b> </b>subsidiary Iron Mountain to build the first segment of the Thumb Loop high-voltage transmission line. Phase 1 of the double-circuit, 345,000-volt (345 kV) line will extend about 62 miles from the site of the new Bauer substation in Tuscola County, to the new Rapson substation in Huron County in the state’s Thumb region. Line construction began in early April and will continue into 2013, with crews drilling pole foundations, installing steel monopole and lattice structures, and stringing conductors. ITC has negotiated easement agreements and established access points for equipment and materials along a 200-foot-wide transmission corridor.</p>
<p><b>Western Electricity Coordinating Council </b>(WECC) contracted <b>Siemens Power Technologies International </b>(PTI) to deliver WECC’s Base Case Coordination System (BCCS) planning tool. Based on Siemens PTI’s Model on Demand software product, the BCCS will improve the collection and compilation of data WECC uses to build its transmission system study models. Siemens says a centralized data base within the BCCS system will ensure model data consistency and data accuracy, and will provide tracking and data logging to comply with North American Electric Reliability Corp. (NERC) standards. The project is scheduled for completion in December 2012. </p>
<h4>People</h4>
<p><b>SoloPower</b> elected <b>General Wesley K. Clark </b>(ret.), to the company’s board of directors as an independent director.</p>
<p><b>Westinghouse </b>appointed <b>James A. Noyes</b> as v.p. of installation and modification services, nuclear services. Most recently, Noyes was v.p. of marketing and sales for the company’s Asia region.</p>
<p><b>SunPower </b>named <b>Charles D. Boynton</b> v.p. and CFO of the company. Prior to joining SunPower, Boynton was CFO for ServiceSource International.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/generation-markets">Generation &amp; Markets</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/td-grid">T&amp;D Grid</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/finance">Finance</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field 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<a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/american-electric-power">American Electric Power</a><span class="pur_comma">, </span><a href="/tags/american-recovery-and-reinvestment-act">American Recovery and Reinvestment Act</a><span class="pur_comma">, </span><a href="/tags/arra">ARRA</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/blink">Blink</a><span class="pur_comma">, </span><a href="/tags/bluestar-energy-holdings">BlueStar Energy Holdings</a><span class="pur_comma">, </span><a href="/tags/bluestar-energy-solutions">BlueStar Energy Solutions</a><span class="pur_comma">, </span><a href="/tags/california-energy-commission">California Energy Commission</a><span class="pur_comma">, </span><a href="/tags/california-independent-system-operator">California Independent System Operator</a><span class="pur_comma">, </span><a href="/tags/california-public-utilities-commission">California Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/calpine">Calpine</a><span class="pur_comma">, </span><a href="/tags/ccs">CCS</a><span class="pur_comma">, </span><a href="/tags/cec">CEC</a><span class="pur_comma">, </span><a href="/tags/chevron">Chevron</a><span class="pur_comma">, </span><a href="/tags/cobank">CoBank</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/constellat">Constellat</a><span class="pur_comma">, </span><a href="/tags/constellation">Constellation</a><span class="pur_comma">, </span><a href="/tags/constellation-energy">Constellation Energy</a><span class="pur_comma">, </span><a href="/tags/consumers-energy">Consumers Energy</a><span class="pur_comma">, </span><a href="/tags/cpuc">CPUC</a><span class="pur_comma">, </span><a href="/tags/cpv">CPV</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/department-energy">Department of Energy</a><span class="pur_comma">, </span><a href="/tags/dg">DG</a><span class="pur_comma">, </span><a href="/tags/doe">DOE</a><span class="pur_comma">, </span><a href="/tags/dominion">Dominion</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/duke-energy-renewables">Duke Energy Renewables</a><span class="pur_comma">, </span><a href="/tags/dynegy">Dynegy</a><span class="pur_comma">, </span><a href="/tags/ecotality">ECOtality</a><span class="pur_comma">, </span><a href="/tags/edison-mission-energy">Edison Mission Energy</a><span class="pur_comma">, </span><a href="/tags/emcor-group">EMCOR Group</a><span class="pur_comma">, </span><a href="/tags/emeter">eMeter</a><span class="pur_comma">, </span><a href="/tags/entergy">Entergy</a><span class="pur_comma">, </span><a href="/tags/entergy-louisiana">Entergy Louisiana</a><span class="pur_comma">, </span><a href="/tags/entergy-new-orleans">Entergy New Orleans</a><span class="pur_comma">, </span><a href="/tags/epc">EPC</a><span class="pur_comma">, </span><a href="/tags/ev">EV</a><span class="pur_comma">, </span><a href="/tags/ev-connect">EV Connect</a><span class="pur_comma">, </span><a href="/tags/evs">EVs</a><span class="pur_comma">, </span><a href="/tags/exelon">Exelon</a><span class="pur_comma">, </span><a href="/tags/first-solar">First Solar</a><span class="pur_comma">, </span><a href="/tags/first-wind">First Wind</a><span class="pur_comma">, </span><a href="/tags/ford">Ford</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/itc">ITC</a><span class="pur_comma">, </span><a href="/tags/mdm">MDM</a><span class="pur_comma">, </span><a href="/tags/nerc">NERC</a><span class="pur_comma">, </span><a href="/tags/nextera">NextEra</a><span class="pur_comma">, </span><a href="/tags/nextera-energy">NextEra Energy</a><span class="pur_comma">, </span><a href="/tags/nextera-energy-resources">NextEra Energy Resources</a><span class="pur_comma">, </span><a href="/tags/north-american-electric-reliability-corp-0">North American Electric Reliability Corp.</a><span class="pur_comma">, </span><a href="/tags/nrc">NRC</a><span class="pur_comma">, </span><a href="/tags/nrg">NRG</a><span class="pur_comma">, </span><a href="/tags/nrg-energy">NRG Energy</a><span class="pur_comma">, </span><a href="/tags/nuclear">Nuclear</a><span class="pur_comma">, </span><a href="/tags/nuclear-regulatory-commission">Nuclear Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/pepco-energy-services">Pepco Energy Services</a><span class="pur_comma">, </span><a href="/tags/puget-sound-energy">Puget Sound Energy</a><span class="pur_comma">, </span><a href="/tags/pv">PV</a><span class="pur_comma">, </span><a href="/tags/quanta-services">Quanta Services</a><span class="pur_comma">, </span><a href="/tags/rec">REC</a><span class="pur_comma">, </span><a href="/tags/recovery">Recovery</a><span class="pur_comma">, </span><a href="/tags/reliability">Reliability</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/renewable-energy">Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/res">RES</a><span class="pur_comma">, </span><a href="/tags/san-diego-county">San Diego County</a><span class="pur_comma">, </span><a href="/tags/sce">SCE</a><span class="pur_comma">, </span><a href="/tags/shaw-group-0">Shaw Group</a><span class="pur_comma">, </span><a href="/tags/siemens">Siemens</a><span class="pur_comma">, </span><a href="/tags/siemens-energy">Siemens Energy</a><span class="pur_comma">, </span><a href="/tags/smartsynch">SmartSynch</a><span class="pur_comma">, </span><a href="/tags/smr">SMR</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/solar-panels">solar panels</a><span class="pur_comma">, </span><a href="/tags/southern-california-edison">Southern California Edison</a><span class="pur_comma">, </span><a href="/tags/southwest-solar-technologies">Southwest Solar Technologies</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/sumitomo">Sumitomo</a><span class="pur_comma">, </span><a href="/tags/sumitomo-corp">Sumitomo Corp.</a><span class="pur_comma">, </span><a href="/tags/sunpower">SunPower</a><span class="pur_comma">, </span><a href="/tags/technology">Technology</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/tucson-electric-power">Tucson Electric Power</a><span class="pur_comma">, </span><a href="/tags/us-department-energy">U.S. Department of Energy</a><span class="pur_comma">, </span><a href="/tags/union-bank-0">Union Bank</a><span class="pur_comma">, </span><a href="/tags/verizon">Verizon</a><span class="pur_comma">, </span><a href="/tags/verizon-wireless">Verizon Wireless</a><span class="pur_comma">, </span><a href="/tags/wecc">WECC</a><span class="pur_comma">, </span><a href="/tags/western-electricity-coordinating-council">Western Electricity Coordinating Council</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a> </div>
</div>
Tue, 01 May 2012 04:00:00 +0000puradmin13395 at http://www.fortnightly.comVendor Neutralhttp://www.fortnightly.com/fortnightly/2012/04/vendor-neutral
<div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Vendor Neutral</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">April 2012</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1204-VENpic1.jpg" width="1142" height="1433" alt="Siemens is supplying SWT-2.3-108 wind turbines for MidAmerican Energy’s 407-MW expansion project in Iowa." title="Siemens is supplying SWT-2.3-108 wind turbines for MidAmerican Energy’s 407-MW expansion project in Iowa." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1204-VENpic2.jpg" width="982" height="646" alt="AEP started operations at its 580-MW Dresden gas-fired combined cycle plant." title="AEP started operations at its 580-MW Dresden gas-fired combined cycle plant." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1204-VENpic3.jpg" width="800" height="532" alt="Jacobs Engineering is rebuilding a gas-fired power plant within a historic building on the University of Minnesota campus in Minneapolis." title="Jacobs Engineering is rebuilding a gas-fired power plant within a historic building on the University of Minnesota campus in Minneapolis." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1204-VENpic4.jpg" width="761" height="512" alt="DTE Energy Services finished converting the formerly coal-fired Mt. Poso power plant to burn biomass." title="DTE Energy Services finished converting the formerly coal-fired Mt. Poso power plant to burn biomass." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1204-VENpic5.jpg" width="1054" height="1500" alt="National Grid is installing Coulomb Technologies electric vehicle charging stations at 30 locations around Massachusetts. " title="National Grid is installing Coulomb Technologies electric vehicle charging stations at 30 locations around Massachusetts. " /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><h4>Generation</h4>
<p><b>MidAmerican Energy</b> awarded a contract to <b>Siemens Energy</b> to supply wind turbines for its 407-MW project expansion. Siemens will supply 176 turbines to be installed at four sites in Iowa. The orders follow the completion of Siemens projects in Iowa exceeding 593 MW of wind capacity. Siemens is expected to provide SWT-2.3-108 turbines for MidAmerican’s 103.5-MW Vienna project, to be located in Marshall and Tama counties; its 200.1-MW Eclipse project in Guthrie and Audubon counties; the 101.2-MW Morning Light project in Adair County; and one 2.3-MW turbine at the Rolling Hills project. The contract includes a five-year service, maintenance, and warranty agreement. The nacelles and blades for the turbines will be manufactured at Siemens’ facilities in Fort Madison, Iowa, and Hutchinson, Kan.</p>
<p><b>American Electric Power</b> began operating the 580-MW Dresden natural gas-fired combined-cycle power plant. AEP purchased the partially built Dresden plant from Dominion Resources in 2007 for about $85 million. AEP accelerated construction in January 2011. Total costs for the plant were about $366 million. The Dresden plant will supply electricity to AEP’s Appalachian Power customers in West Virginia, Virginia and Tennessee.</p>
<p><b>Duke Energy</b> and <b>China</b><b>Huaneng Group</b> signed a three-year agreement expanding their research cooperation to include coal and carbon capture and sequestration technologies. The companies initially signed a memorandum of understanding in 2009 to share information on renewable and clean energy technologies. In 2009, Huaneng developed a facility that economically captured 120,000 tons of the carbon dioxide per year emitted from the 1,320-MW coal-fired Shidongkou power station. The expanded agreement calls for an engineering study to determine the potential feasibility of applying Huaneng’s carbon capture process at unit 3 of Duke’s Gibson station in Indiana. The U.S.-China Clean Energy Research Center is providing funding for the collaborative effort.</p>
<p><b>Macpherson Energy</b> and <b>DTE Energy Services</b> (DTEES) completed their project to convert the Mt. Poso cogeneration plant in Kern County, Calif., to rely entirely on biomass fuel—primarily urban and agricultural wood waste—instead of coal. Starting in November 2011, one year after the conversion project began, the plant began delivering 44 MW of capacity to the California grid under a long-term power purchase agreement with Pacific Gas &amp; Electric. The plant also produces steam for enhanced production at a nearby oil field owned by Macpherson Energy. JPMorgan Chase provided tax credit financing for the project.</p>
<p>The <b>University of Minnesota</b> awarded a design services contract to <b>Jacobs Engineering</b> for the decommissioning, historic preservation, and construction of the Old Main Utility Building (OMUB) power plant in Minneapolis. A 14-MW gas-fired power plant will augment an existing coal-burning facility to provide electricity and steam for the university campus. The project will cost $81 million.</p>
<p>The <b>Next Generation Nuclear Plant (NGNP) Industry Alliance</b> selected the <b>Areva</b> Generation IV reactor concept as its design for next-generation nuclear plants. The high-temperature gas-cooled reactor (HTGR) is intended to provide an inherently safe and secure design by ensuring no internal or external event could cause a release of radioactive material. Areva says the HTGR’s modular design would support applications in power generation, petrochemicals, unconventional oil recovery, and synthetic fuel production.</p>
<p><b>Siemens Industry</b> introduced its new Sinvert PVM UL inverter, designed to convert solar energy into grid-compliant AC voltage. The inverters are available in the range from 12 kW to 24 kW for small- to medium-sized plants, and Simens says they’re capable of 98 percent peak efficiency. The inverters are compliant with IEC, UL and NFPA standards.</p>
<h4>Demand Response</h4>
<p><b>Honeywell</b> implemented a two-year pilot program with <b>Hawaiian Electric Co.</b> to demonstrate how demand response (DR) technology can help integrate more intermittent renewable energy into the electric grid. Hawaiian Electric will conduct a test of fast DR technology, which gives the utility and commercial and industrial facilities the tools to temporarily reduce demand within 10 minutes of notification. When the utility triggers an event, the system will communicate with building management systems to automatically execute load-shed measures that customers set in advance, such as cycling air conditioners and turning off non-essential lights, pumps, and motors. In the first phase, the program will provide more than 6 MW of semi-automated load control. </p>
<p>, which provides standby power systems, expanded its service offerings to include support and management of generators in DR programs. Titan will focus primarily on interruptible-rate DR, which uses a customer’s onsite power generation as a source of load control. The DR management program combines generator service and maintenance, onsite monitoring, remote control, and trend analyses.</p>
<h4>Enterprise Software</h4>
<p><b>Canary Labs</b> released v.9.5 of its data historian and trending applications. The new version expands data replication, communication capabilities, mobile features, add-ins for Microsoft Excel, and support for historical aggregates. The company says the upgrade will simplify the consolidation of data to a centralized server. Drivers allow Canary Labs to interface with third-party business systems such as Oracle, SAP and Crystal Reports.</p>
<p><b>Space Time Insight</b> introduced the Situational Intelligence Suite for Utilities, a set of applications that convert real-time, historical, and predictive data into displays for decision-making. Built on geospatial and visual analytics software, the system is designed to allow utility managers to visualize and analyze assets, resources, and operating conditions, which the company says will facilitate collaboration across departments. The system’s smart meter application is intended to help organizations visually correlate real time meter data with enterprise, grid, communications, environmental, and other information streams to better understand their smart meter operations.</p>
<h4>Smart Grid</h4>
<p>The <b>Siemens</b> smart grid division and TIBCO Software provided smart grid enterprise integration services to <b>Consolidated Edison</b> for a smart grid demonstration project funded by a Department of Energy (DOE) grant under the <i>American Recovery and Reinvestment Act</i>. TIBCO says its enterprise messaging technology will give Con Edison real-time flow of information across deployed assets for decision making capabilities, while Siemens smart grid visualization capabilities provide a browser-based user interface. Implementation began in August 2011, with completion scheduled for May 2013.</p>
<p><b>Hitachi</b> and <b>Silver Spring Networks</b> formed a strategic alliance, under which the two companies will jointly undertake R&amp;D for new smart grid products. Hitachi and Silver Spring have been working together on a collaborative smart grid demonstration project on the Hawaiian island of Maui since the spring of 2011. As part of the strategic alliance, Hitachi will acquire convertible bonds with stock acquisition rights to be issued by Silver Spring.</p>
<p><b>Commonwealth Edison</b> contracted <b>Silver Spring Networks</b> to deploy its smart energy platform for a network of nearly 4 million customers and distribution automation devices under the state’s recently enacted <i>Energy Infrastructure Modernization Act</i>. ComEd’s 10-year plan aims to invest $2.6 billion in electric infrastructure, including smart grid technology. Technology deployments are subject to approval by the Illinois Commerce Commission.</p>
<h4>EVs &amp; Storage</h4>
<p><b>Green Charge Networks</b> selected battery manufacturer <b>Saft</b> to support its role in Con Edison’s $92 million smart grid demonstration project. Funded by a DOE grant, the project includes installation and operation of a network of storage and generation units that communicate directly with Con Edison. Green Charge Networks expects to install the units at several convenience stores, car rental locations, hotels, and parking garages in the New York City area. Saft will supply systems capable of storing about 1 MWh of electricity, utilizing its Synerion lithium-ion batteries. Installation was scheduled to begin in March.</p>
<p><b>Austin Energy</b> chose <b>VYCON</b> to install flywheel systems to provide 4.8 MW of energy storage capacity to support a new, 190,000 square-foot data center that Austin Energy uses to control its grid. The utility chose flywheels over battery-based uninterruptible power systems (UPS). For extended outages, the system will provide ride-through protection to transfer to a standby engine generator. The units feature a 20-year lifespan and minimal maintenance requirements.</p>
<p><b>National Grid</b> is installing more than 30 electric vehicle (EV) charging stations in Massachusetts. <b>Coulomb Technologies</b> will provide charging infrastructure at no cost, while National Grid pays for installation, and hosting partners bear the cost of electricity to charge vehicles. The stations are expected to be installed at Hanover Mall, the City of Worcester, the Town of Rockland, Quinsigamond Community College of Worcester, Worcester Polytechnic Institute, and restaurant locations including 99 and Chili’s.</p>
<p><b>Intelligent Energy</b> and <b>Suzuki Motor</b> created a joint venture called <b>SMILE FC System Corp.</b> to develop and manufacture air-cooled fuel cell systems for various applications. The venture gives Suzuki a non-exclusive license to Intelligent Energy’s technology for its next generation of fuel cell vehicles. Intelligent Energy will benefit from Suzuki’s production expertise and access to the Japanese supply chain for system development and manufacturing.</p>
<p>The <b>General Services Administration</b> (GSA) awarded a contract to <b>Siemens</b> to provide 20 EV charging stations to the U.S. government. Community Level-2 stations will be deployed at Veterans Affairs facilities in California and Michigan, with services delivered via the ChargePoint Network.</p>
<h4>T&amp;D</h4>
<p><b>American Transmission Co. (ATC)</b> awarded a $90 million order to <b>ABB</b> to design, supply and install a 200-MW back-to-back HVDC-light (high-voltage direct current) converter station in Michigan. The system is intended to control power flows between the state’s Upper and Lower Peninsulas, and provide dynamic voltage support. ATC hopes the project will support regional grid reliability and enable integrating additional wind generation. The link is scheduled to begin operating in mid-2014.</p>
<p><b>ATC</b> and <b>Minnesota Power</b> formed a partnership to study transmission development options for moving Midwestern wind energy and Canadian hydro power into Minnesota, Wisconsin and Michigan. The companies proposed 50-mile, double-circuit, 345-kilovolt transmission line from the Mesabi iron range to their jointly owned Arrowhead substation in Duluth, Minn., to begin service around the year 2020. In addition, ATC and Minnesota Power are studying transmission options connecting the Arrowhead substation to destinations in Wisconsin and Michigan, under development terms still to be determined. The companies previously worked together on the 220-mile, 345-kV Arrowhead-Weston transmission line from Duluth to Wausau, Wisc., which was energized in 2008.</p>
<p><b>Harris Corp.</b> released the new Momentum digital mobile radio system. The product targets utilities and other organizations that are working to meet the FCC’s deadline for transitioning to narrow-banding communications systems. The system communicates in both analog and digital signals, and includes several new features, including the capability to operate as a desktop control station.</p>
<h4>Natural Gas</h4>
<p><b>NiSource Gas Transmission &amp; Storage</b> launched a midstream natural gas project in eastern Ohio, including a 90-mile, large-diameter gathering system located along Columbia Gas rights of way, and a cryogenic gas-liquids processing plant to be delivered in July 2012. The system, with an initial capacity of 200 million cubic feet per day, will deliver gas to multiple interconnects including Texas Eastern (operated by Spectra Energy), Rocky Mountain Express (Kinder Morgan), and Columbia Gas. </p>
<p><b>3M</b> and <b>Chesapeake Energy</b> agreed to collaborate in designing, manufacturing, and marketing compressed natural gas (CNG) tanks for use in the U.S. transportation market. Chesapeake pledged an initial $10 million toward design and certification services and market development support, and committed to use the new tanks for its corporate fleet conversion to CNG. 3M engaged Hypercomp Engineering of Utah for the design and certification of tanks, and will focus its capital on operations and manufacturing. 3M expects to begin selling the tanks in the fourth quarter of 2012.</p>
<h4>Transactions</h4>
<p><b>Fortis Inc.</b>, the largest investor-owned distribution utility in Canada, agreed to acquire CH Energy Group of New York for $1.5 billion, including $500 million of assumed debt. Subject to approvals by shareholders and regulators, the transaction is expected to close in the first quarter of 2013. CH Energy, parent company of Central Hudson Gas &amp; Electric, is expected to remain a standalone utility with headquarters in Poughkeepsie. Lazard served as CH Energy Group’s financial advisor, and Wachtell, Lipton, Rosen &amp; Katz served as the company’s legal advisor.</p>
<p><b>LS Power</b> completed financing and authorized construction of the $550 million Arlington Valley Solar Energy II project, a 127-MW (AC) PV facility on more than 1,100 acres of land near Arlington, Ariz. Beginning in 2013, the project is expected to begin selling its output to San Diego Gas &amp; Electric under a long-term agreement. LS Power contracted Fluor Corp. to engineer, procure, and construct the project and provide operation and maintenance services. Financing was structured with two tranches, combining a long-term institutional financing led by Prudential Capital Group with a shorter-term bank financing led by Banco Santander. GE Energy Financial Services is participating as an equity partner.</p>
<p><b>El Paso Corp.</b> agreed to sell its exploration and production business, EP Energy, for about $7.15 billion to private equity firms led by Apollo Global Management and Riverstone Holdings, with investment from Access Industries and others. The sale was contemplated in Kinder Morgan’s previously announced agreement to acquire El Paso Corp., and is contingent upon completion of the Kinder Morgan deal. Kinder Morgan expects to use the proceeds from selling EP Energy to pay down debt it raised to finance the El Paso purchase. Both transactions are expected to close in the second quarter of 2012.</p>
<p><b>Capital Dynamics AG</b> acquired a 5.7-MW solar energy project located in Massachusetts, from an undisclosed owner. The project is expected to use more than 20,000 solar modules, and sell power to three municipal utilities under 20-year net-metering agreements. Construction is expected to be completed this summer.</p>
</div></div></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-opencalais-calaisdocumentc-tags field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">CalaisDocumentCategory: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/calais-document-category/technology">Technology</a></li><li class="taxonomy-term-reference-1"><a href="/calais-document-category/business">Business</a></li></ul></div><div class="field field-name-opencalais-currency-tags field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Currency: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/currency/usd">USD</a></li></ul></div><div class="field field-name-opencalais-eventsfacts-tags field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">EventsFacts: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/events-facts/product-release">Product Release</a></li><li class="taxonomy-term-reference-1"><a href="/events-facts/company-expansion">Company Expansion</a></li><li class="taxonomy-term-reference-2"><a href="/events-facts/business-relation">Business Relation</a></li><li class="taxonomy-term-reference-3"><a href="/events-facts/acquisition">Acquisition</a></li><li class="taxonomy-term-reference-4"><a href="/events-facts/company-reorganization">Company Reorganization</a></li><li class="taxonomy-term-reference-5"><a href="/events-facts/company-product">Company Product</a></li><li class="taxonomy-term-reference-6"><a href="/events-facts/company-location">Company Location</a></li><li class="taxonomy-term-reference-7"><a href="/events-facts/company-technology">Company Technology</a></li><li class="taxonomy-term-reference-8"><a href="/events-facts/person-career">Person Career</a></li><li class="taxonomy-term-reference-9"><a href="/events-facts/company-affiliates">Company Affiliates</a></li><li class="taxonomy-term-reference-10"><a href="/events-facts/alliance">Alliance</a></li><li class="taxonomy-term-reference-11"><a href="/events-facts/joint-venture">Joint Venture</a></li><li class="taxonomy-term-reference-12"><a href="/events-facts/company-using-product">Company Using Product</a></li></ul></div><div class="field field-name-opencalais-naturalfeature-tags field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">NaturalFeature: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/natural-feature/rolling-hills">Rolling Hills</a></li><li class="taxonomy-term-reference-1"><a href="/natural-feature/mt-poso">Mt. Poso</a></li><li class="taxonomy-term-reference-2"><a href="/natural-feature/maui">Maui</a></li></ul></div><div class="field field-name-opencalais-position-tags field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Position: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/position/data-historian">data historian</a></li></ul></div><div class="field field-name-opencalais-socialtags-tags field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">SocialTags: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/social-tags/energy">Energy</a></li><li class="taxonomy-term-reference-1"><a href="/social-tags/physics">Physics</a></li><li class="taxonomy-term-reference-2"><a href="/social-tags/electric-power-transmission-systems">Electric power transmission systems</a></li><li class="taxonomy-term-reference-3"><a href="/social-tags/smart-grid">Smart grid</a></li><li class="taxonomy-term-reference-4"><a href="/social-tags/smart-meter">Smart meter</a></li><li class="taxonomy-term-reference-5"><a href="/social-tags/sustainable-energy">Sustainable energy</a></li><li class="taxonomy-term-reference-6"><a href="/social-tags/siemens">Siemens</a></li><li class="taxonomy-term-reference-7"><a href="/social-tags/renewable-energy">Renewable energy</a></li><li class="taxonomy-term-reference-8"><a href="/social-tags/demand-response">Demand response</a></li><li class="taxonomy-term-reference-9"><a href="/social-tags/wind-power-texas">Wind power in Texas</a></li><li class="taxonomy-term-reference-10"><a href="/social-tags/deployment-solar-power-energy-grids">Deployment of solar power to energy grids</a></li><li class="taxonomy-term-reference-11"><a href="/social-tags/technology">Technology</a></li></ul></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
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<a href="/tags/abb">ABB</a><span class="pur_comma">, </span><a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/american-electric-power">American Electric Power</a><span class="pur_comma">, </span><a href="/tags/american-recovery-and-reinvestment-act">American Recovery and Reinvestment Act</a><span class="pur_comma">, </span><a href="/tags/american-transmission">American Transmission</a><span class="pur_comma">, </span><a href="/tags/american-transmission-co">American Transmission Co.</a><span class="pur_comma">, </span><a href="/tags/areva">Areva</a><span class="pur_comma">, </span><a href="/tags/arrowhead-weston">Arrowhead-Weston</a><span class="pur_comma">, </span><a href="/tags/atc">ATC</a><span class="pur_comma">, </span><a href="/tags/austin-energy">Austin Energy</a><span class="pur_comma">, </span><a href="/tags/banco-santander">Banco Santander</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/ch-energy-group">CH Energy Group</a><span class="pur_comma">, </span><a href="/tags/chargepoint">ChargePoint</a><span class="pur_comma">, </span><a href="/tags/chesapeake-energy">Chesapeake Energy</a><span class="pur_comma">, </span><a href="/tags/china">China</a><span class="pur_comma">, </span><a href="/tags/comed">ComEd</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/con-edison">Con Edison</a><span class="pur_comma">, </span><a href="/tags/coulomb">Coulomb</a><span class="pur_comma">, </span><a href="/tags/coulomb-technologies">Coulomb Technologies</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/department-energy">Department of Energy</a><span class="pur_comma">, </span><a href="/tags/doe">DOE</a><span class="pur_comma">, </span><a href="/tags/dominion">Dominion</a><span class="pur_comma">, </span><a 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Sun, 01 Apr 2012 04:00:00 +0000puradmin13406 at http://www.fortnightly.comVendor Neutralhttp://www.fortnightly.com/fortnightly/2012/02/vendor-neutral
<div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Vendor Neutral</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - February 2012</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1202-VENpic1.jpg" width="1478" height="1044" alt="Entergy closed a $346-million deal to acquire the 583-MW Rhode Island State Energy Center." title="Entergy closed a $346-million deal to acquire the 583-MW Rhode Island State Energy Center." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1202-VENpic2.jpg" width="500" height="447" alt="Duke Energy and American Transmission Co. acquired the 950-mile Zephyr Power transmission project from Pathfinder Renewable Wind Energy." title="Duke Energy and American Transmission Co. acquired the 950-mile Zephyr Power transmission project from Pathfinder Renewable Wind Energy." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1202-VENpic3.jpg" width="383" height="236" alt="MidAmerican Energy Holdings acquired a 49-percent stake in the 290-MW Agua Caliente solar PV project in Arizona." title="MidAmerican Energy Holdings acquired a 49-percent stake in the 290-MW Agua Caliente solar PV project in Arizona." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1202-VENpic4.jpg" width="711" height="416" alt="GE signed a $300 million contract to supply 13 Frame 7EA gas turbines to Saudi Electricity Co." title="GE signed a $300 million contract to supply 13 Frame 7EA gas turbines to Saudi Electricity Co." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1202-VENpic5.jpg" width="690" height="518" alt="NRG will install 1,500 solar panels at the MetLife football stadium, home of the New York Jets and Giants." title="NRG will install 1,500 solar panels at the MetLife football stadium, home of the New York Jets and Giants." /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><h4>Transactions</h4>
<p><span class="boldred">Constellation Energy</span> signed a definitive agreement to acquire 100 percent of <span class="boldred">ONEOK Energy Marketing Co.</span> (OEMC), a Tulsa, Okla.-based retail natural gas marketing company with 26,100 customers. The proposed purchase of OEMC, a subsidiary of ONEOK, for $22.5 million, plus working capital, expands Constellation Energy’s business and residential customer base in seven states: Kansas, Oklahoma, Missouri, Texas, Nebraska, Wyoming and Illinois. The deal is scheduled to close in the first quarter of 2012.</p>
<p><span class="boldred">Siemens</span> signed an agreement to acquire all of the stock of <span class="boldred">eMeter</span>, headquartered in San Mateo, Calif. Terms weren’t disclosed. eMeter will be part of the smart grid division of the Siemens Infrastructure &amp; Cities Sector, which is housed within Siemens Industry Inc. eMeter will become a global business segment and center of competence for meter data management (MDM), and will continue operating from its San Mateo headquarters.</p>
<p><span class="boldred">Entergy Wholesale Commodities</span> completed the previously announced purchase of the Rhode Island State Energy Center (RISEC), a 583-MW power plant located in Johnston, R.I., from subsidiaries of <span class="boldred">NextEra Energy</span> for approximately $346 million. The Siemens natural gas-fired combined-cycle generating plant entered service in 2002. RISEC recently completed work with Siemens to uprate its combustion turbines, increasing the facility’s nominal capacity from 550 MW.</p>
<p><span class="boldred">OwnEnergy</span> closed a transaction in Kay County, Okla., in which <span class="boldred">NextEra Energy Resources</span> will acquire, construct and operate the 60-MW Blackwell wind farm. Startup is expected by the end of 2012, with output sold under a long-term contract to Oklahoma Gas &amp; Electric, which entered a parallel 20-year agreement to provide wind power to the Stillwater campus of Oklahoma State University.</p>
<p>A joint venture of <span class="boldred">Duke Energy</span> and <span class="boldred">American Transmission Co. </span>(DATC) acquired the <span class="boldred">Zephyr Power</span> transmission project from a subsidiary of Pathfinder Renewable Wind Energy. The Zephyr project is a 950-mile transmission line that would deliver wind energy generated in eastern Wyoming to California and the southwestern United States. Pathfinder is developing a wind power project on more than 100,000 acres near Chugwater, Wyo., and has committed to use at least 2,100 MW of the Zephyr project’s 3,000-MW capacity. The Zephyr project would originate in Chugwater and terminate in the Eldorado Valley just south of Las Vegas, Nev. The 500-kV high-voltage direct current (HVDC) project, estimated to cost approximately $3.5 billion, will include an AC/DC converter station at each end. While wind generation and transmission development are being pursued separately, Pathfinder and DATC have agreed to work together to increase the viability of the integrated projects.</p>
<p><span class="boldred">Duke Energy Renewables</span> purchased the 5-MW Ajo and 15-MW Bagdad solar projects from <span class="boldred">Recurrent Energy</span>. The Ajo project started up in late September, and the Bagdad project is scheduled for startup by the end of 2012. <span class="boldred">Arizona Public Service Co. </span>(APS) will buy all of the output from both solar farms under two 25-year agreements. Financial terms weren’t disclosed.</p>
<p><span class="boldred">JCM Capital</span> signed an agreement with <span class="boldred">Hay Solar Holdings</span> to provide development, construction, and long-term equity financing for a 30 MW portfolio of modular 100-kW farm building solar installations located throughout Ontario. JCM has secured feed-in-tariff contracts for 65 commercial rooftop sites and has already started the construction of its first site in the fourth quarter of 2011. This agreement with Hay Solar brings JCM’s total portfolio volume to approximately 155 MW. </p>
<p><span class="boldred">MidAmerican Energy Holdings</span> agreed to acquire the Topaz Solar Farm, a 550-MW photovoltaic (PV) power plant being built in San Luis Obispo County, Calif. from First Solar. First Solar will construct, operate, and maintain the project. Construction began in November 2011 and is expected to be complete by early 2015. Pacific Gas &amp; Electric will purchase the output under a 25-year power purchase agreement.</p>
<p><span class="boldred">MidAmerican Energy Holdings</span> also announced it would acquire a 49-percent interest in <span class="boldred">Agua Caliente</span>, a 290- MW PV project located in Yuma County, Ariz., from <span class="boldred">NRG Energy</span>. The $1.8 billion project, which is being built by <span class="boldred">First Solar</span> and expected to be complete by 2014, is supported by a $967 million loan guarantee from the U.S. Department of Energy and a long-term power purchase agreement with <span class="boldred">Pacific Gas and Electric</span> for all of the project’s generation. The deal is subject to closing conditions, including DOE approval.</p>
<p><span class="boldred">ABB</span> agreed to invest approximately $20 million as part of a $35 million financial round, for a substantial minority stake in California-based GreenVolts, a provider of turnkey concentrating PV (CPV) systems. Through the investment ABB gains access to proprietary CPV technology in addition to its current capabilities in solar thermal and conventional PV power plants. </p>
<p><span class="boldred">First Wind</span> obtained $210 million in financing for the company’s subsidiary, <span class="boldred">Palouse Wind</span>, the owner of the 105-MW Palouse wind project located in northern Whitman County, Wash. As part of the financing, Palouse Wind closed an approximate $170 million construction and term facility loan, and letters of credit of up to $40 million. KeyBank served as the joint lead arranger and administrative agent, and Norddeutsche Landesbank Girozentrale, CoBank ACB, and Banco Santander served as joint lead arrangers. The project will feature 58 Vestas 1.8-MW wind turbines with a generating capacity of about 105 MW of electricity. Avista will purchase the output. First Wind says Palouse will be the first wind project built in Avista’s service territory. It’s expected to be operational before the end of 2012.</p>
<h4>T&amp;D</h4>
<p><span class="boldred">Princeton Power Systems</span> (PPS) announced the first planned installation of its bi-directional HVDC transformer. The transformer will function as a power management device, distributing power between two or more remote locations in Alaska when it’s installed in early 2012. The transformer has a power capacity rating of 1 MW and can be installed in parallel for higher power levels. Princeton Power Systems says that with the technology’s ability to function over great distances, the transformer will be useful for sending power over large bodies of water, or rough terrain like that in Alaska.</p>
<p><span class="boldred">Long Island Power Authority</span> (LIPA) selected <span class="boldred">PSEG Long Island</span> to manage LIPA’s electric transmission and distribution system. Under the agreement, PSEG Long Island will be responsible for managing electric T&amp;D operations and customer services, as well as LIPA’s 18-percent ownership of Nine Mile Point 2 nuclear station in upstate New York, and related functions. <span class="boldred">Lockheed Martin</span>, a subcontractor to PSEG Long Island, will provide services related to transition management, information technology, corporate business, energy efficiency and other issues. As part of the management contract, PSEG Long Island will be expected to develop and implement a number of operational improvements to provide safe and reliable service, increase customer satisfaction, and manage the utility’s operational and maintenance costs.</p>
<p><span class="boldred">Fluor</span> signed a memorandum of understanding with <span class="boldred">Plains and Eastern Clean Line</span> to provide development support and preliminary engineering, procurement and construction (EPC) services for the proposed Plains &amp; Eastern Clean Line project, an 800-mile, 3,500 MW, HVDC transmission line from Oklahoma to Tennessee, currently in the development and permitting stages. As part of Fluor’s MOU with Clean Line, Fluor and subcontractor Pike Electric will provide initial permitting and development support services. After the project has received all permits and regulatory and financial approvals, Fluor and Pike will provide full EPC services. It could begin commercial operations as early as 2017. </p>
<h4>Smart Grid</h4>
<p><span class="boldred">Western Electricity Coordinating Council</span> (WECC) selected <span class="boldred">Alstom Grid</span> to supply smart grid synchrophasor software applications for its Western Interconnection SynchroPhasor Program (WISP). Alstom Grid will provide wide-area monitoring technologies for phasor display and historical archiving. The WISP efforts are already underway and the project is scheduled to be completed in March 2013.</p>
<p><span class="boldred">Mountain Parks Electric</span> (MPEI) awarded a contract to <span class="boldred">Open Systems International</span> (OSI) to provide a new SCADA and distribution management system. In a second phase of this project, MPEI expects to implement advanced distribution management system functionalities, including electronic mapping, distribution power flow and volt/VAR control. </p>
<p><span class="boldred">United Energy</span> (UE) and <span class="boldred">Multinet Gas</span> (MG) contracted <span class="boldred">Telvent</span> to replace their current SCADA systems with a multi-utility single platform for managing their electricity and gas distribution networks. UE and MG hope the integrated data collection will provide real-time data to improve daily operations.</p>
<h4>Generation</h4>
<p><span class="boldred">Juhl Wind</span> began commercial operations at the $22 million, 10-MW Valley View wind farm located near the company’s headquarters in Chandler, Minn. The facility uses five Gamesa G87 wind turbines to generate power for sale to Xcel Energy through a long-term agreement. </p>
<p><span class="boldred">SunPower</span> and <span class="boldred">NRG</span> started construction of the 250-MW California Valley Solar Ranch (CVSR) project in San Luis Obispo County, Calif. The companies say the project is one of the largest central-station PV plants in the world. The facility uses the SunPower T0 Tracker with SunPower solar panels and pre-manufactured system cabling. </p>
<p><span class="boldred">Kiewit Power Constructors</span> and <span class="boldred">Sargent &amp; Lundy</span> awarded a contract to <span class="boldred">Hitachi Power Systems America</span> to supply air pollution controls equipment for Unit 1 and Unit 2 at Kansas City Power &amp; Light’s La Cygne generating station. The contract includes wet flue gas desulfurization systems, fabric filters, mercury control systems and appurtenant systems for both Unit 1 (815 MW) and Unit 2 (715 MW), and low NOx burners, over-fire air equipment, and a selective catalytic reduction system for Unit 2.</p>
<p><span class="boldred">KGRA</span> and <span class="boldred">Appalachian Midstream Services</span>, a subsidiary of <span class="boldred">Chesapeake Energy</span>, agreed to build and install a customized 2-MW waste heat-to-power system. Chesapeake will work with KGRA’s subsidiary, Liberty WHR Partners, to install the alternative energy project at one of its Marcellus Shale gas gathering compression facilities in Bradford County, Penn. KGRA’s system will convert waste heat from a series of compressor engines into retail grade electricity. The power can be used on site or sold back into the grid by KGRA. KGRA will begin installation as early as the first quarter of 2012.</p>
<p><span class="boldred">GE</span> signed contracts totaling almost $300 million with the <span class="boldred">Saudi Electricity Co. </span>(SEC) to supply 13 gas turbines and associated services for the expansion of six power plants at various locations across the country. The expansions will add nearly 800 MW of power to the Saudi grid by the summer of 2013, in time to support peak electricity demands and reduce the risk of blackouts. In addition to supplying 13 Frame 7EA gas turbines and associated generators for the plant expansions, GE will provide technical advisory services and performance testing. The turbines will be manufactured in GE’s factory in Greenville, S.C. Commercial operation is scheduled to begin in May 2013.</p>
<p><span class="boldred">Gemma Renewable Power </span>(GRP) entered a $16.6 million EPC contract with <span class="boldred">Southern Sky Renewable Energy Canton</span> to design and build a 5.7-MW (DC) PV facility located on a closed capped landfill in Canton, Mass. Completion is scheduled for the summer of 2012.</p>
<p><span class="boldred">FirstEnergy Solutions</span> signed a long-term agreement to purchase the output from the 20-MW <span class="boldred">Maryland Solar Farm</span>, a $70-million facility planned for Hagerstown, Md. Located on 250 acres of state-owned correctional facility land, the project is expected to be the largest solar facility in Maryland and among the largest on the East Coast. FirstEnergy Solutions will purchase the project’s output for 20 years, and will obtain the renewable energy credits produced. The project is expected to be operational in 2013. </p>
<p><span class="boldred">DTE Biomass Energy</span> started operating a 3.2-MW landfill gas-to-energy facility at the Smith’s Creek landfill in Kimball Township in Michigan. The landfill operates one of the first commercial-scale septage injection landfill gas systems in the United States, whereby material extracted from septic tanks is applied to the landfill to speed the decomposition of organic waste.</p>
<p><span class="boldred">NRG</span> and <span class="boldred">New Meadowlands Stadium</span> announced a new sponsorship agreement to bring solar power to MetLife Stadium, home of the New York Jets and New York Football Giants. In addition, NRG will provide all of the additional electricity for the 82,500-seat stadium starting in June 2012. The solar power system, consisting of approximately 1,500 individual panels manufactured by <span class="boldred">Atlantis Energy Systems</span> of Poughkeepsie, N.Y., will be able to generate nearly 25 times the amount of electricity needed to power the stadium’s integrated LED lighting and display system. The panels will be assembled into 52 modules that will be raised to the top level of the stadium and bolted into a steel superstructure that will also provide shelter from rain and snow. </p>
<h4>EVs &amp; Storage</h4>
<p><span class="boldred">Cadeville Gas Storage</span> executed a 10-year agreement with <span class="boldred">Shell Energy North America</span> for Cadeville to construct a depleted reservoir storage facility in Ouachita Parish, La., near the Perryville-Delhi Hub in northeast Louisiana. The storage facility is expected to be in service in 2013 and is designed to have approximately 17.0 BCF of working gas capacity. </p>
<p>The <span class="boldred">Georgia Institute of Technology</span> and <span class="boldred">Recharge Solutions International</span> (RSI) kicked off a pilot project that demonstrated the newly installed RSI Level 2 220-volt electric vehicle (EV) charging system and 110-volt electric fleet charging system. Level 2 chargers will be available to the university’s faculty, students and visitors. Users can register for short- or long-term charging and pay by credit card on an hourly or monthly basis. The fleet charging system will allow the university to monitor the usage and costs of its present electric vehicle fleet.</p>
<p>The <span class="boldred">Pennsylvania Department of Environmental Protection</span> announced a $1 million grant award to help develop electric vehicle infrastructure on the Pennsylvania turnpike. The grant recipient, <span class="boldred">Car Charging Group</span>, will install charging stations at 17 turnpike service plazas. Level 2 charging stations, which can charge a car in roughly four hours, and Level 3 stations, which can charge a car in about 20 minutes, will be installed at the service plazas in three phases. The first phase of the work will be incorporated into ongoing service-plaza renovations between Harrisburg and New Jersey. Later phases will involve service plazas between Harrisburg and Ohio, and then along the Northeastern Extension. The project is expected to be completed in June 2013. The Turnpike Commission also has committed up to $500,000 in electric upgrades at the plazas to provide the charging stations with the necessary voltage. The DEP grant is provided through the Alternative Fuels Incentive Grant Program, which is funded by a portion of the gross utilities receipts tax. </p>
<h4>Energy Services</h4>
<p><span class="boldred">Science Applications International Corp. </span>(SAIC) was awarded the funding for the next two years of its contract with the <span class="boldred">Hawaii Public Utilities Commission</span> (PUC) to continue as the program administrator for the Hawaii Energy Efficiency Program. SAIC has served in this capacity since March 2009. The two-year performance contract, valued at more than $66 million, may be extended beyond 2013 for an additional three-year period. </p>
<h4>Metering</h4>
<p><span class="boldred">Delaware County Electric Cooperative</span> (DCEC) selected <span class="boldred">Landis+Gyr</span> to install a Gridstream PLC network for advanced metering across its distribution system. The Gridstream network will enable the utility to install two-way load control devices, report outages on a system-wide basis, and provide information to consumers through a web portal and in-home displays. The utility will also be working on a pilot project with the <span class="boldred">Electric Power Research Institute</span> (EPRI) to demonstrate the efficiency of hybrid electric appliances. </p>
<p><span class="boldred">Oklahoma Gas and Electric</span> (OGE) selected <span class="boldred">Silver Spring Networks’s</span> demand response solution to expand OGE’s peak-reduction programs to all customers in its service territory. OGE hopes its demand response program and integration of wind power will allow the company to achieve its goal of avoiding building fossil-fueled generation plants until at least 2020. </p>
<h4>People</h4>
<p><span class="boldred">Mona E. Dajani</span> joined <span class="boldred">Baker &amp; McKenzie</span> as a partner in its Chicago office. Ms. Dajani most recently practiced with SNR Denton, and earlier in her career she worked at Kirkland &amp; Ellis.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/td-grid">T&amp;D Grid</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/vendor-neutral">Vendor Neutral</a></li></ul></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
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<a href="/tags/abb">ABB</a><span class="pur_comma">, </span><a href="/tags/acb">ACB</a><span class="pur_comma">, </span><a href="/tags/agua-caliente">Agua Caliente</a><span class="pur_comma">, </span><a href="/tags/alstom">Alstom</a><span class="pur_comma">, </span><a href="/tags/alstom-grid">Alstom Grid</a><span class="pur_comma">, </span><a href="/tags/american-transmission">American Transmission</a><span class="pur_comma">, </span><a href="/tags/american-transmission-co">American Transmission Co.</a><span class="pur_comma">, </span><a href="/tags/appalachian-midstream-services">Appalachian Midstream Services</a><span class="pur_comma">, </span><a href="/tags/aps">APS</a><span class="pur_comma">, </span><a href="/tags/arizona-public-service-co">Arizona Public Service Co.</a><span class="pur_comma">, </span><a href="/tags/atc">ATC</a><span class="pur_comma">, </span><a href="/tags/atlantis-energy-systems">Atlantis Energy Systems</a><span class="pur_comma">, </span><a href="/tags/avista">Avista</a><span class="pur_comma">, </span><a href="/tags/banco-santander">Banco Santander</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/biomass">Biomass</a><span class="pur_comma">, </span><a href="/tags/cadeville-gas-storage">Cadeville Gas Storage</a><span class="pur_comma">, </span><a href="/tags/car-charging-group">Car Charging Group</a><span class="pur_comma">, </span><a href="/tags/cec">CEC</a><span class="pur_comma">, </span><a href="/tags/chesapeake-energy">Chesapeake Energy</a><span class="pur_comma">, </span><a href="/tags/citi">Citi</a><span class="pur_comma">, </span><a href="/tags/cobank">CoBank</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/constellation-energy">Constellation Energy</a><span class="pur_comma">, </span><a href="/tags/cpv">CPV</a><span class="pur_comma">, </span><a href="/tags/datc">DATC</a><span 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</div>
Wed, 01 Feb 2012 05:00:00 +0000puradmin13427 at http://www.fortnightly.comRegulating Fine Particleshttp://www.fortnightly.com/fortnightly/2012/02/regulating-fine-particles
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Developing a new paradigm for managing fine particulate air pollution.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Annette C. Rohr and Ronald E. Wyzga</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Technology Corridor</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Annette C. Rohr</b> is program manager for air quality, health, and risk assessment at the Electric Power Research Institute (EPRI), and <b>Ronald E. Wyzga</b> is a senior technical executive and biostatistician at EPRI.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - February 2012</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Fine particulate matter—particles less than 2.5 micrometers in diameter, or PM2.5—has been linked with a number of adverse health effects, including premature mortality, cardiovascular disease, and respiratory diseases such as asthma. PM2.5 is a complex mixture comprised of hundreds of different components, both inorganic and organic. Inorganic components include sulfate and nitrate—formed from gaseous sulfur dioxide (SO<sub>2</sub>) and nitrogen oxides (NOx)—as well as elemental species such as selenium, mercury, arsenic and chromium. Coal-fired power plants are the most significant source of SO<sub>2</sub>, while traffic is responsible for most NOx. Organic PM components include polycyclic aromatic hydrocarbons and a host of other compounds. These organic materials are derived from a variety of sources, including traffic and wood smoke, and from reactions between emissions of volatile organic compounds (VOC) from anthropogenic and natural vegetative sources and other atmospheric constituents. Black carbon (BC)—sometimes referred to as soot—is found primarily in tailpipe emissions, especially those from diesel vehicles, and wood smoke. BC is a significant contributor to ambient PM in urban areas.</p>
<p>The composition of PM2.5 varies geographically. In the eastern United States, organic compounds and sulfate dominate the mixture, whereas in the western U.S., organic compounds, dust particles, and nitrate dominate the mix. There’s also temporal variability on both short-term and longer term scales; sulfate and organic compounds are more important in the warmer summer months, while nitrate levels increase in the colder winter months.</p>
<p>Much of what we currently know about PM2.5 and health comes from the field of epidemiology, which evaluates statistical associations between population exposure to PM and resultant health effects. There are many studies that demonstrate a statistically significant association between PM2.5 and health; however, there is a scientific consensus that all components within the PM mixture aren’t equally harmful to health. Indeed, accumulating evidence from epidemiology as well as toxicology—the use of controlled exposures in either animals or humans—indicates that different PM components impact health differently. Authoritative studies on such evidence could help inform efforts to regulate PM emissions in the ways that will best protect public health.</p>
<h4>Component-Based Standards</h4>
<p>Epidemiological and toxicological research by EPRI and others indicates that PM health effects differ significantly depending on PM’s composition. EPRI’s <i>Aerosol Research and Inhalation Epidemiology Study</i> (ARIES) is one of the most comprehensive air pollution epidemiology studies ever conducted, in terms of the breadth of air quality monitoring and health endpoints studied. The study, which began in 1998 and is still ongoing, measures more than 100 air pollution variables each day and links changes in these variables to changes in mortality, emergency department visits, hospital admissions, unscheduled physician visits, and arrhythmias in patients with implanted defibrillators.</p>
<p>Results from ARIES have been published in the scientific literature and point to the importance of carbon-containing compounds and some pollutant gases in explaining adverse health effects. In contrast, sulfate and nitrate don’t show consistent health effects. Similarly, findings from the EPRI-led <i>Bi City Concentrated Ambient Particle Study</i>—a toxicological study conducted in Detroit and Steubenville, Ohio—show that trace metals associated with local industries, such as steel manufacturing and sludge incineration, as well as traffic sources, are better predictors of health impacts than are components typically associated with coal burning, such as sulfates and nitrates.</p>
<p>A substantial effort is being expended in the scientific community to increase insight into those components that appear to most strongly impact health. The burgeoning information on the differential toxicity of PM components has even led the National Research Council of the National Academy of Sciences to state that developing a better understanding of the compositional effects of PM must be a high research priority. The recently funded U.S. Environmental Protection Agency (EPA) Clean Air Research Centers encompass a portfolio of research that should generate additional data toward meeting that goal.</p>
<p>The EPA regulates PM via a mass-based standard that doesn’t take into account compositional differences. The National Ambient Air Quality Standard (NAAQS) for PM2.5 is currently set at 65 micrograms per cubic meter of air for 24 hours, and 15 micrograms/m3 on an annual basis, although EPA regularly reviews these standards as part of its five-year review cycle for NAAQS. The next review of the PM NAAQS is expected to begin in 2014. The specific approach to meeting the NAAQS, including which sources will be targeted for control, is determined through state implementation plans (SIP), which are developed by the states with approval and guidance from EPA. Other regulations, such as the Cross-State Air Pollution Rule, are incorporated into the SIP planning process.</p>
<p>Regulating on the basis of mass alone means that PM emissions in general are targeted to meet the standard, with no consideration given to specific components. In practice, this often has translated into regulating those emissions that are easiest and most cost-effective to control with no consideration of differential toxicity of pollutants resulting from those emissions. If there are indeed significant differences in toxicity between types of PM, this approach might not result in anticipated public health benefits, since the more toxic components might not be preferentially reduced. Moreover, if the concentration of a specific toxic component is the biologically relevant metric, public health could potentially be worsened, since the relative concentration of the toxic components of the PM mixture could increase.</p>
<p>In May 2010, EPRI convened a multi-stakeholder workshop to explore possible alternatives to the current mass-based PM standard. One potential approach identified would be to develop specific standards for those components deemed to be most harmful to human health. In this way, the most toxic components would be controlled, and public health likely would be improved. Workshop participants discussed the ways by which component-specific regulation could be accomplished. First, the current PM NAAQS could be replaced by NAAQS for specific PM components. Alternatively, component-specific standards could be established in addition to the existing PM mass-based standards. The latter approach would address total PM but give emphasis to particular components. Given the remaining uncertainty around the specific components of PM that are most toxic, the workshop participants thought the latter alternative would be the most workable.</p>
<p>Additionally, the majority of workshop participants believed that carbon-containing PM and possibly nickel would be the most likely candidates for component-specific regulation if such an approach were implemented.</p>
<h4>Regulating Black Carbon</h4>
<p>There are many carbon-containing compounds in PM. They are generally defined by the ways they are measured. Two major categories are black—or elemental—carbon (BC or EC), and organic carbon (OC). EPA, for example, is measuring these two categories at its Chemical Speciation Network monitoring sites. More health studies have considered black carbon than other measures of carbonaceous particles because BC can be easily measured by looking at light absorption of particles in the atmosphere. Black carbon has been associated with health impacts in many epidemiological studies, and it also plays a role in visibility impairment. Fewer studies have examined other categories of carbon-containing particles, such as organic carbon, but among them many have reported significant associations between these particles and health. The reality is that there are many different carbon-containing compounds, and some are more toxic than others. Clearly the available information isn’t sufficient to identify the toxicities of the many specific compounds, and thus it might be necessary to consider broad categories of carbon compounds in any initial regulatory approach to managing PM in the environment.</p>
<p>If a specific carbon standard were proposed, it would have direct and important implications for emitters, including electric power companies. The extent to which BC, OC, or a broader carbon-containing PM fraction—such as total carbon, or TC—are reduced will impact the ability of a specific region to satisfy mass-based standards. This in turn can affect the need to reduce other fractions of PM, such as sulfate or nitrate. As a result, research is needed to collect as much information as possible about the breadth of carbon-containing compounds that influence health, as well as how these compounds relate to readily available measures of carbon-containing compounds.</p>
<h4>Health-Based Standards</h4>
<p>The current health effects literature needs to be systematically reviewed and organized in an effort to determine which measures of carbon-containing compounds are most frequently and highly associated with health impacts. This involves epidemiological studies which include ambient measurements of carbon-containing compounds, as well as toxicological studies that may help elucidate the underlying biological mechanisms that could provide support for the observed associations. This evidence needs to then be weighed to determine whether it is of sufficient quality to be used in a regulatory context, which is the job of the scientific community and regulators such as EPA.</p>
<p>If the evidence is judged sufficient, then it will be necessary to identify the sources of these compounds and how emissions relate to ambient concentrations. The latter is likely to be quite complex because of potential atmospheric reactions that create new compounds; in this case it’s important to identify the precursors. As is the case currently with ozone, identifying the most important precursors would be critical in reducing the concentrations of carbon-containing compounds subject to regulation. In the event that a carbon standard were proposed, EPA would need to conduct ambient air monitoring to comprehensively characterize concentrations nationwide in an effort to identify those areas of the country that would be out of compliance. Ideally, extensive monitoring would be undertaken early in the process and would consider several alternative measures of carbon-containing particles. This information would aid health studies and better inform those who decide on the need and form of regulations.</p>
<p>Development of a new paradigm to establish a strong health-based ambient air quality standard for PM and its components has extensive informational needs that could require several years to satisfy. However, the potential for more effective protection of public health warrants a comprehensive assessment of this issue.</p>
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Wed, 01 Feb 2012 05:00:00 +0000puradmin13426 at http://www.fortnightly.comHedging Under Scrutinyhttp://www.fortnightly.com/fortnightly/2012/02/hedging-under-scrutiny
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Planning ahead in a low-cost gas market.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Julie Ryan and Julie Lieberman</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Energy Risk &amp; Markets</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Julie Ryan</b> is a vice president and <b>Julie Lieberman</b> is a project manager with Concentric Energy Advisors. The authors acknowledge the editorial contributions of Steve Caldwell and Carrie O’Neill.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - February 2012</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The new world of gas supply, brought about by shale development, the economic downturn, and expanded gas infrastructure, has caused regulatory stakeholders to challenge utility gas supply hedging programs.</p>
<p>Hedging, a common feature of utility risk management practices, serves as a tool to stabilize prices, protect customers from market volatility, and insure against unexpected price spikes. However, regulatory commissions and intervenors are challenging the merits of their utilities’ hedging programs with increasing frequency, questioning whether the risk mitigation benefits of hedging have justified the associated costs, and whether customers are paying for insurance to manage a risk that might no longer exist.</p>
<p>Concerns raised by commission staff or other stakeholders relating to the cost of utility hedging programs has led to an emerging trend of greater commission and stakeholder involvement in assessing such programs’ efficacy. Regulatory commissions are asking utilities to provide written justification of their hedging practices, applying pressure on utilities to work with stakeholders to resolve hedging differences through collaborative processes and to find common ground on the risk-reward spectrum. In some cases, risk management hedging programs have been suspended until there are visible increases in volatility and market prices.</p>
<p>Utilities that engage stakeholders in a dialogue now about their risk-management practices can ensure hedging remains a viable tool for limiting exposure to future price volatility.</p>
<h4>Costs Incurred and Avoided</h4>
<p>This shift toward re-assessing hedging practices is relatively recent. In 2008, a survey conducted by the National Regulatory Research Institute (NRRI) indicated that most commissions in the U.S. either supported or were neutral to hedging.<sup>1</sup> This was reinforced in a follow-up survey the AGA conducted in 2009.<sup>2</sup> Among more than 100 respondents, over 90 percent said their commissions allowed financial hedging of commodity price risk. However, only a very small number of commissions required utilities to engage in financial hedging.</p>
<p>Push-back on utility hedging typically begins with intervenors. Ultimately, however, most administrative law judges and commissions generally support hedging. While intervenors often recommend disallowance of hedging costs, commissions generally accept that the goal of hedging is price stability and not “to beat the market.” As a result, cost disallowance decisions by commissions have been rare.<sup>3</sup> But, in an environment where utility customers are experiencing across-the-board rate increases, it isn’t surprising that commissions would encourage utilities to evaluate changes to their hedging programs.</p>
<p>Intervenors have tended to take a retrospective view when evaluating the efficacy of hedging programs. While it’s tempting to look at historical hedging based on current information and perfect hindsight, the regulatory standard for what is reasonable and prudent must consider the availability of information and what was known at the time hedging decisions were made. This is the standard commissions have adopted when reviewing historical hedging costs.</p>
<p>Many stakeholders have focused on costs associated with hedging, but there has been less focus by all parties on avoided cost analysis. In several instances, success—or lack thereof—has been measured by comparing the hedged prices to spot market prices. The costs have included net premiums paid for call options, as well as the difference between the fixed price or option strike price and the spot market price. There is often a failure to see the cost of options as an insurance premium, as well as to consider a fixed price as a rate stabilization tool. Further, what’s missing is more analysis of the potential avoided cost. Additional scenario analysis would demonstrate the risk of what could have occurred as well as estimate the potential price exposures avoided as a result of hedging.</p>
<p>Additionally, some stakeholders raise the concept of “least cost” in hedging program critiques. Care must be exercised when applying the least-cost principle to hedging, which presents trade-offs in risk, reward, and costs, depending upon the hedging instrument. Using the analogy of insurance, it is possible to buy an inexpensive policy with a low premium, but this is usually accomplished by increasing the deductible, placing a cap on the total payout, or carving out conditions under which benefits aren’t paid. Additionally, different hedging strategies yield different benefits, depending on market price direction. For example, if a utility is purchasing energy in a rising-price market, a fixed price purchase might be optimal as there is no option payment incurred and the coverage starts immediately. In a range-bound market, a costless collar might be the lowest cost of insurance, and in a declining market, a cap at a relatively high strike might be the most attractive form of hedge protection.</p>
<h4>The Shale Gas Factor</h4>
<p>A review of comments filed by commission staff and other stakeholders shows that shale gas development is repeatedly referred to as a “game changing” technology. Shale gas producers access prolific geological deposits of reserves for production at relatively low costs, which has led to significantly dampened price volatility and lower market prices.</p>
<p>While the emergence of shale gas production is generally well-known by intervenors and regulators, the broader market dynamics are less well understood. Equally important is the fact that new pipeline infrastructure has served to deliver shale gas supplies into what historically have been transportation-constrained end markets, thereby changing traditional basis-pricing relationships and further easing price volatility. Additionally, new LNG import facilities and expansions in natural gas storage capacity in recent years have contributed to expanded supply capacity. These supply and capacity additions have occurred at the same time that demand has declined. On the demand side, increasing energy efficiency measures and declining demand resulting from weak economic conditions have dampened consumption.</p>
<p>However, history repeatedly has shown that commodity market conditions are never stagnant, and that markets often correct as supply and demand factors re-balance. The recent 24 months of price declines have lulled many stakeholders into believing that low gas prices are now the norm, but market conditions will change at some point. The question is when, how quickly, and to what degree? If we have learned anything from the past, it is that we cannot predict the future with certainty. In the future, changing supply-demand factors might turn market prices in the other direction.</p>
<p>Utilities will want to be prepared before a market shift occurs. On the supply front, there might be environmental regulation that slows shale gas production, additional compliance requirements that increase shale gas production costs, or technical factors that reduce the projected size of economical reserves. Natural gas demand might increase due to stymied nuclear plant development, rising coal plant operating costs, or closures of coal plants as a result of environmental compliance. New demand could result from economic recovery, LNG exports, or new natural gas and electric vehicle use. A combination of these factors could cause the North American gas supply-demand balance to materially shift, bringing about increases in market prices and volatility.</p>
<p>As market prices have dropped, many stakeholders are encouraging utilities to adapt their hedging practices to the current market supply and pricing paradigm. Some have suggested utility hedging be reduced until such time as gas market prices show some sign of rallying. Others are taking a more proactive stance, encouraging longer-dated hedging and new hedging program design.</p>
<p>Two commissions that recently have suspended hedging activities are the Public Utilities Commission of Nevada (December 2010), with respect to Nevada Power, and the British Columbia Utilities Commission (July 2011), in regard to FortisBC. The commissions didn’t disallow previously executed hedge transactions, and they left existing hedges in place; the decisions applied to future hedging activity.</p>
<p>In its Dec. 16, 2010 order (Docket No. 10-09003), the Nevada PUC approved a stipulation that included the requirement that Nevada Power not proceed with any additional financial gas hedges. However, the utility was told it should continue reviewing natural gas hedging in light of prevailing market fundamentals and conditions.<sup>4</sup> More recently, on July 22, 2011, the British Columbia Utilities Commission rejected FortisBC’s “Price Risk Management Plan.” In the order, the Commission Panel wrote: “in light of the recent exploitation of shale gas, the likelihood for more stable natural gas prices is significantly greater and the risk of dramatically higher natural gas prices, excepting short periods of price disconnects, is significantly lower than it has been in many years.”<sup>5</sup> Further, the panel suggested that hedging was not the best way to deal with the potential for price increases, but commented that if there were a change in market conditions, they would be willing to consider proposals to mitigate price risks for customers. They concluded by saying that the performance of the utility’s “Price Risk Management Plan” over the last 10 years did not convince them that continuation of the program was in the ratepayers’ interest.</p>
<h4>Measuring Prudence</h4>
<p>Hedging programs are undergoing a greater degree of regulatory scrutiny. In some instances, hedging programs have been scrutinized and continued without modification, while in other cases, hedging programs have been targeted for additional review.</p>
<p>In spring 2009, the Colorado Public Utilities Commission commented on testimony filed by commission staff, which criticized gas hedging by Xcel’s subsidiary, Public Service Company of Colorado. The staff had conducted a quantitative analysis to determine that during the period following Hurricane Katrina (2005-2006), the utility’s hedges were close to breaking even, <i>i.e.</i>, the premium paid for hedging nearly equaled the benefits it provided over spot market prices. But a break-even analysis of the hedging costs compared to spot market prices for the period 2005 to 2008 illustrated that the utility only regained approximately one third of every dollar spent on hedging. Ultimately, in its order, the commission supported the administrative law judge’s position that the utility’s hedging program should not be suspended. In his recommended decision, the judge wrote, “Preapproved elements of the [hedging] plan avoid hindsight evaluation of each program. Simply stated, [the plan] is to be evaluated based upon information available at the time, not in terms of whether the plan ‘beat the market.’ To the extent Public Service implements such a plan, as approved, the associated hedging costs should not be subject to disallowance in any subsequent gas cost prudence review proceedings.”<sup>6 </sup></p>
<p>In another example, a commission decided to open a utility’s hedging program to further review. In May 2011, in response to PacifiCorp’s rate filing for Rocky Mountain Power, the Utah Industrial Energy Consumers filed direct testimony asking the Utah Public Service Commission to disallow $19.7 million in revenue requirements related to what the group called “imprudent hedging practices” by the utility. Rocky Mountain Power’s hedging program layered-in hedges 48 months into the future, hedging nearly 100 percent of its open commodity price risk. In the industrial group’s testimony, it commented that the utility’s hedging program wasn’t adjusted to account for changes in market conditions and the expanding supply of natural gas through shale gas production.<sup>7</sup> Hence, the industrial group suggested the utility was imprudent to hedge such a large percentage of its open positions and should have reduced its fixed-price hedges, to leave open one-third of its portfolio to spot market pricing.</p>
<p>In July 2011, a stipulation was filed with the Utah PSC where the parties agreed to a collaborative process to review possible changes to the company’s hedging practices. As part of the stipulation, it was agreed that the utility’s past hedges wouldn’t be disallowed, but that the utility would implement any changes that result from the collaborative process or commission order. Issues addressed in the collaborative process included: a new maximum hedge volume percentage limit or range; risk tolerance bands based on time-to-expiry value-at-risk (TEVaR) or value-at-risk (VaR) limits; position limits; a process for review of hedging transactions outside of accepted guidelines, including natural gas reserves or storage; liquidity, transparency, and other risks of different hedging tools such as financial swaps, fixed-price physical forward contracts, and options; a semi-annual confidential report on hedging status; and coordination and implementation issues relating to the inclusion of financial swap transactions in Rocky Mountain Power’s energy balancing account.<sup>8</sup> The stipulation was approved in a commission order on Sept. 13, 2011, and PacifiCorp and the other stakeholders were expected to complete discussions by January 2012.</p>
<p>In February 2011, the South Carolina Office of Regulatory Staff (ORS) requested suspension of the hedging programs of South Carolina Electric and Gas (SCE&amp;G) and Piedmont Natural Gas. The ORS commented that the hedging costs incurred by the utilities might be appropriate for markets where there is significant price volatility, but were not appropriate for more stable natural gas market conditions. According to the ORS, SCE&amp;G’s hedging program cost customers more than $50 million since 2006, and Piedmont’s program cost over $37 million since 2002.<sup>9</sup> This request for suspension was later withdrawn in July 2011, and it was determined that the utilities and the ORS would address the prudence of the hedging activities in each of the companies’ respective annual purchased gas adjustment (PGA) proceedings.<sup>10 </sup></p>
<p>In SCE&amp;G’s PGA proceeding, the ORS evaluated the company’s hedging program and affirmed its previous recommendation that the hedging program should be suspended. SCE&amp;G agreed to immediately suspend all hedging until the commission directs it to recommence. The agreement anticipates that changing market conditions—<i>e.g.</i>, environmental restrictions on shale gas production—could warrant a resumption of hedging.<sup>11</sup> Conversely, Piedmont’s hedging program was approved in its PGA proceeding with the removal of its previously established minimum hedging requirement of 22.5 percent. Although Piedmont’s gas purchasing and hedging activities were deemed to be prudent, there was disagreement on whether gas purchasing and hedging activities, pursuant to a commission-approved hedging program, should be subject to an after-the-fact prudence determination. The commission requested an <i>ex-parte</i> briefing on the issue of how to measure prudency in hedging programs.<sup>12</sup></p>
<h4>Strategic Adaptation</h4>
<p>In some jurisdictions, regulators are modifying the hedging program horizon and limiting discretionary actions. In Delaware, Delmarva Power has a programmatic hedging program with periodic hedging at pre-determined intervals. In 2009, the utility reduced the tenor and the total volume of hedging. More recently, in response to Delmarva Power’s “Gas Cost Rate” filing, a consultant for the commission staff proposed two alternative hedging strategies to enhance flexibility in the hedging framework and to provide a greater smoothing effect on gas price spikes. The consultant recommended either lengthening the “hedging interval” beyond 18 months to take advantage of lower volatility in outer months; or implementing dollar cost averaging,<sup>13</sup> with fixed dollars allocated for hedges rather than fixed volumes, so that hedging volumes would increase in low-priced market environments and would decrease in higher-priced market environments. The consultant stated that dollar cost averaging results in lower gas costs when compared to a less-flexible, programmatic hedging strategy.<sup>14</sup> Although no changes were made to Delmarva Power’s gas hedging program, the company agreed to review and discuss the staff consultant’s recommendations for modification.<sup>15</sup></p>
<p>In Michigan, intervenors in the Consumers Energy rate case proposed a range of changes to reduce the volume and tenor of hedging under the utility’s fixed-price hedging program to address concerns that the utility was over-hedging with fixed-price purchases. In that proceeding, intervenors urged the commission to eliminate the “tiered” strategy, which provided for programmatic purchases of fixed price supply in accordance with monthly hedge targets, and suggested modifications to the company’s “quartile” strategy, which it had employed in tandem with the tiered strategy, using historical pricing to determine the amount of forward market hedging. All parties proposed a reduction in annual hedging caps. The ALJ decision supported the company’s proposed plan, but indicated that certain accelerated purchases under the tiered strategy would require justification by market conditions to be deemed prudent.<sup>16</sup> At this writing, a final decision in this proceeding was pending.</p>
<p>In California, parties to the electric utilities’ procurement plan filings are discussing moving from fixed caps on hedging, as determined by the consumer rate tolerance (CRT) of 1 cent per kilowatt hour, to a restructured CRT that represents a percentage of the individual utility’s system average rate. By moving to a percentage of the system average rate, the percent hedged under the CRT would remain constant and wouldn’t fluctuate with rate changes.<sup>17 </sup></p>
<h4>Locking-In for the Long-Term</h4>
<p>The Public Utility Commission of Oregon approved a $250 million investment in reserves by its gas utility, Northwest Natural. The utility entered an agreement with Encana Oil &amp; Gas (USA) to develop physical gas reserves expected to supply a portion of the utility customers’ requirements over a period of about 30 years, with 8 to 10 percent of Northwest Natural’s average annual requirements supplied through the arrangement. The Commission approved the utility’s plan in April 2011, allowing the utility to recover the costs of gas produced and delivered, plus a rate-base return on investment through its annual PGA mechanism.<sup>18 </sup></p>
<p>In Colorado, the <i>Clean Air - Clean Jobs Act</i> of 2010 (HB 10-1365), included a legislative provision to facilitate fuel-switching from coal to natural gas, while protecting ratepayers from volatility in prices. The provision provides regulatory certainty that utilities will be allowed full cost recovery, without risk of future disallowance, for commission-approved, long-term gas contracts—of between three and 20 years in duration—entered into pursuant to the act.<sup>19</sup> To that end, Public Service Company of Colorado and Anadarko entered a 10-year, fixed-price gas supply agreement, subject to annual price escalations, that is projected to result in savings to ratepayers of approximately $97 million, when compared to forecast gas costs without the contract.<sup>20</sup></p>
<p>Black Hills Energy of Colorado has incorporated a long-term hedging strategy into its “Gas Mitigation Plan.” The plan provides for hedging between 50 and 70 percent of its gas requirements under normal conditions, with the remaining gas requirements purchased in the monthly or daily spot market. Of the hedged volumes, half are comprised of fixed-price swaps phased in over three separate terms: three years, five years, and seven years. The long-term hedges, once fully phased-in, will represent approximately half of the company’s normal annual volume requirements. Another 20 percent of the gas supply requirements are hedged using call options in a short-term hedging strategy for the upcoming year.<sup>21 </sup></p>
<p>Commissions will continue to review their utilities’ hedging plans in a critical light, and it will be necessary for utilities to work in collaboration with stakeholders to consider adaptations to hedging plans that respond to new market conditions and that protect customers in the event of rising gas and power prices.</p>
<h4>Window of Opportunity</h4>
<p>Hedging objectives are an important part of the dialogue between commissions and utilities, and avoided costs need to be considered in developing a hedging program. “Hedging” can mean different things to different parties. Therefore, an important first step is to obtain broad consensus about the objectives of the utility’s hedging program. By way of simple example, one objective could be that hedging is intended to protect customers against price spikes during certain high usage seasons, while another objective might be to protect customers against rising price trends that could occur over an extended period of time.</p>
<p>One benefit arising from the increased focus on utility hedging is that regulators and stakeholders have grown increasingly sophisticated about commodity markets and hedging, and some might support more complex programs in the future. However, the more discretionary a program design, the more critical decisional documentation and transparent processes become. Further, there must be rigor and consistency in how hedging is adjusted in different market price environments. It will be important in the design and approval stage that the hedging program has clear triggers for when hedging decisions will be executed. During the implementation stage, it will be important for utilities to document information that was known to them at the time hedges were transacted to demonstrate that reasonable actions were taken, consistent with the program design.</p>
<p>It is somewhat ironic that in today’s market, as the price of hedging has declined, stakeholder support for hedging has waned. The low-price and low market-volatility environment introduces opportunities to execute hedges at historically attractive price levels. If utilities were to abstain from hedging until volatility increased and market prices rose, the cost of hedging would increase to the point where hedging could be deemed by regulators to be too costly for ratepayers.</p>
<p>In jurisdictions where intervenors and perhaps regulators might be reluctant to support an expansive hedging program at current lower market prices, utilities should use a collaborative process to garner support. The first objectives would be to improve stakeholders’ understanding of the supply-demand market fundamentals that have contributed to current lower prices, and to explain future trends and events that could move market prices upward. A better understanding of market drivers and how prices could potentially change will help stakeholders appreciate the utility’s need to be ready with hedging strategies to protect customers from rising wholesale market prices.</p>
<p>The second objective would be to engage stakeholders in a dialogue about how the utility’s current hedging program was developed, and to listen to stakeholders’ concerns. Working collaboratively, it is possible for all the parties to bring a fresh perspective to the hedging program and consider how it might be adapted under varied market conditions. Such efforts will yield the greatest benefit for utilities and their customers if they happen before supply-demand conditions materially change market prices, and the current window of opportunity closes.</p>
<p> </p>
<h4>Endnotes:</h4>
<p>1. National Regulatory Research Institute, <i>NRRI Services: Survey on State Commission and Local Gas Distribution Company Actions in Addressing High Natural Gas Prices</i>, (July 3, 2008).</p>
<p>2. Bruce McDowell, <i>AGA Rate Inquiry: Regulatory Hedging Policies</i>, American Gas Association, (Fall 2009).</p>
<p>3. In a recent commission order (Docket No. UE 228), the Public Utility Commission of Oregon penalized Portland General Electric (PGE) for failure in 2007 to document the reasons for executing 2012 gas hedges. In its decision, the Commission noted its 2002 order (in Docket No. UE 139) in which the commission disallowed costs associated with certain of PGE’s forward power purchases citing the company’s failure to provide evidence regarding price trends or internal company market analyses that might have supported the reasonableness of the company’s decisions. In its decision in UE 228, the commission reduced the utility’s 2012 net variable power costs forecast by $2.6 million “to ensure management’s future compliance” with commission orders. The penalty was calculated as the monetary equivalent of a one-year, 10-basis-point reduction in PGE’s authorized return on equity. Public Utility Commission of Oregon, Docket No. UE 228, <i>2012 Annual Power Cost Update Tariff</i>, (Nov. 2, 2011).</p>
<p>4. Public Utilities Commission of Nevada, Docket No. 10-09003, <i>Application of NV Power Co d/b/a NV Energy for Approval of its Energy Supply Plan Update for 2011-2012</i>, Order (Dec. 16, 2010) and Stipulation (Nov. 9, 2010). Note, in September 2011, Nevada Power submitted a proposal to engage in new hedging, using out-of-the-money call options in its filing to the Public Utilities Commission of Nevada, <i>Application of Nevada Power Company d/b/a NV Energy for Approval of its Energy Supply Plan Update for 2012</i>, Docket No. 11-09003, (Sept. 1, 2011). However, in its draft order in the same docket, dated Dec. 14, 2011, the commission rejected NV Energy’s hedging proposal and ordered NV Energy to continue the existing commission-approved hedging strategy described in the stipulation that the commission approved in Docket No. 10-09003 on Nov. 9, 2010, without exception.</p>
<p>5. British Columbia Utilities Commission, Order Number 6-120-11, <i>Application by Terasen Gas Inc. and Terasen Gas (Vancouver Island) Inc. (collectively Terasen Gas) (now FortisBC Energy Inc. and FortisBC Energy (Vancouver) Inc.) for Approval of the Price Risk Management Plan Effective April 2011-October 2014</i>, (July 12, 2011).</p>
<p>6. Public Utilities Commission of the State of Colorado, Docket No. 08A-095G, <i>In the Matter of the Application of Public Service Company of Colorado for Authorization to Continue in Effect, On a Permanent Basis, Its Monthly Gas Cost Adjustment Tariffs, With Modifications to provide For Symmetrical Interest on Deferred Balanced of Over- And Under-Recovered Gas Costs, and to Extend For an Additional Four-Year Period the Current Procedures for Seeking and Obtaining Authorization to Implement Annual Gas Price Volatility Mitigation Plans for Its Gas Sales Customers</i>, (March 2, 2009).</p>
<p>7. Public Service Commission of Utah, Docket No. 10-035-124, Direct Testimony of J. Robert Malko, Utah Industrial Energy Consumers, <i>In the Matter of the Application of Rocky Mountain Power for Authority to Increase its Retail Electric Utility Service Rates in Utah and for Approval of its Proposed Electric Service Schedules and Electric Service Regulations</i>, (May 26, 2011).</p>
<p>8. Public Service Commission of Utah, <i>Rocky Mountain Power Settlement Stipulation, (July 28, 2011) and report and order, Rocky Mountain Power 2011 General Rate Case</i>, Docket Nos. 10-035-124, 09-035-15, 10-035-14, 11-035-46 and 11-035-47, (Sept. 13, 2011).</p>
<p>9. South Carolina Office of Regulatory Staff, <i>Letter Re.: Request for Suspension of SCE&amp;G and Piedmont Gas Hedging Programs</i>, Docket No. 2011-82-G, (Feb. 24, 2011).</p>
<p>10. Public Service Commission of South Carolina, Commission Directive, Docket No. 2011-82-G, Order 2011-402, (July 13, 2011).</p>
<p>11. Public Service Commission of South Carolina, Settlement Agreement, <i>IN RE: Annual Review of Purchased Gas Adjustment and Gas Purchasing Policies of South Carolina Electric &amp; Gas Company</i>, Docket No. 2011-5-G, (Nov. 2, 2011).</p>
<p>12. Public Service Commission of South Carolina, Order Ruling On Purchased Gas Adjustment And Gas Purchasing Policies, <i>IN RE.: Annual Review of Purchased Gas Adjustment and Gas Purchasing Policies of Piedmont Natural Gas</i>, Docket No. 2011-4-G – Order No. 2011-580, (Aug. 17, 2011).</p>
<p>13. Dollar cost averaging is the technique of hedging a fixed dollar amount of a particular commodity on a regular schedule, regardless of the contract price. More contracts are purchased when prices are low, and fewer contracts are purchased when prices are high.</p>
<p>14. Public Service Commission of Delaware, PSC Docket No. 010-295F, Direct Testimony of Richard W. Lelash on behalf of the Staff of the Delaware Public Service Commission, <i>In the Matter of the Application of Delmarva Power &amp; Light Company for Approval of Modifications to Its Gas Cost Rates</i>, (Feb. 10, 2011).</p>
<p>15. Public Service Commission of Delaware, Order No. 8061, <i>In the Matter of the Application of Delmarva Power &amp; Light Company for Approval of Modifications to Its Gas Cost Rates</i> (Filed Aug. 31, 2010), PSC Docket No. 010-295F, (Oct. 18, 2011).</p>
<p>16. Michigan Public Service Commission, Case No. U-16485, Notice of Proposal for Decision, ALJ Sharon L. Feldman, <i>In the Matter of the Application of Consumers Energy Company for Approval of a Gas Cost Recovery Plan and Authorization of Gas Cost Recovery Factors For the 12-Month Period April 2011- March 2012</i>, (Sept. 12, 2011).</p>
<p>17. California Public Utilities Commission, Rulemaking 10-05-006, <i>Proposed Decision Approving Modified Bundled Procurement Plans</i>, Proposed Decision of ALJ Peter Allen, (Nov. 10, 2011).</p>
<p>18. Northwest Natural, Securities and Exchange Commission, 10-Q filing (First Quarter 2011).</p>
<p>19. See Colorado General Assembly H.B. 10-1365, Section 40-3.2-206. Part 4 (signed into law April 19, 2010).</p>
<p>20. <i>Statement of Position of Public Service Company of Colorado</i>, in Docket No. 10M-245E, at 72, (Nov. 29, 2010)</p>
<p>21. Direct Testimony of Trent Cozad, Docket No. 11A-580E before the Colorado Public Utility Commission <i>(Re: Gas Mitigation Plan)</i>, pp.3-7.</p>
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<a href="/tags/aga">AGA</a><span class="pur_comma">, </span><a href="/tags/american-gas-association">American Gas Association</a><span class="pur_comma">, </span><a href="/tags/anadarko">Anadarko</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/black-hills-energy-colorado">Black Hills Energy of Colorado</a><span class="pur_comma">, </span><a href="/tags/british-columbia-utilities-commission">British Columbia Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/california-public-utilities-commission">California Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/colorado-public-utilities-commission">Colorado Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/constellat">Constellat</a><span class="pur_comma">, </span><a href="/tags/constellation">Constellation</a><span class="pur_comma">, </span><a href="/tags/consumers-energy">Consumers Energy</a><span class="pur_comma">, </span><a href="/tags/cost">Cost</a><span class="pur_comma">, </span><a href="/tags/crt">CRT</a><span class="pur_comma">, </span><a href="/tags/delmarva-power">Delmarva Power</a><span class="pur_comma">, </span><a href="/tags/distribution">Distribution</a><span class="pur_comma">, </span><a href="/tags/dollar-cost-averaging">Dollar cost averaging</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/entergy">Entergy</a><span class="pur_comma">, </span><a href="/tags/ev">EV</a><span class="pur_comma">, </span><a href="/tags/fortis">Fortis</a><span class="pur_comma">, </span><a href="/tags/fortisbc">FortisBC</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/general-electric">General Electric</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/itc">ITC</a><span class="pur_comma">, </span><a href="/tags/itc-holdings">ITC Holdings</a><span class="pur_comma">, </span><a href="/tags/michigan-public-service-commission">Michigan Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/national-regulatory-research-institute">National Regulatory Research Institute</a><span class="pur_comma">, </span><a href="/tags/natural-gas">Natural gas</a><span class="pur_comma">, </span><a href="/tags/northwest-natural">Northwest Natural</a><span class="pur_comma">, </span><a href="/tags/nrri">NRRI</a><span class="pur_comma">, </span><a href="/tags/nv-energy">NV Energy</a><span class="pur_comma">, </span><a href="/tags/oneok-energy-marketing">ONEOK Energy Marketing</a><span class="pur_comma">, </span><a href="/tags/ors">ORS</a><span class="pur_comma">, </span><a href="/tags/pacificorp">PacifiCorp</a><span class="pur_comma">, </span><a href="/tags/piedmont-natural-gas">Piedmont Natural Gas</a><span class="pur_comma">, </span><a href="/tags/portland-general-electric">Portland General Electric</a><span class="pur_comma">, </span><a href="/tags/public-service-company-colorado">Public Service Company of Colorado</a><span class="pur_comma">, </span><a href="/tags/public-utilities-commission-nevada">Public Utilities Commission of Nevada</a><span class="pur_comma">, </span><a href="/tags/public-utility-commission-oregon">Public Utility Commission of Oregon</a><span class="pur_comma">, </span><a href="/tags/recovery">Recovery</a><span class="pur_comma">, </span><a href="/tags/recurrent-energy">Recurrent Energy</a><span class="pur_comma">, </span><a href="/tags/regulation">Regulation</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/rocky-mountain-power">Rocky Mountain Power</a><span class="pur_comma">, </span><a href="/tags/sce">SCE</a><span class="pur_comma">, </span><a href="/tags/shale-gas">Shale gas</a><span class="pur_comma">, </span><a href="/tags/south-carolina-electric-and-gas">South Carolina Electric and Gas</a><span class="pur_comma">, </span><a href="/tags/south-carolina-office-regulatory-staff">South Carolina Office of Regulatory Staff</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/tariffs">Tariffs</a><span class="pur_comma">, </span><a href="/tags/tevar">TEVaR</a><span class="pur_comma">, </span><a href="/tags/utah-industrial-energy-consumers">Utah Industrial Energy Consumers</a><span class="pur_comma">, </span><a href="/tags/utah-public-service-commission">Utah Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/var">VaR</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a> </div>
</div>
Wed, 01 Feb 2012 05:00:00 +0000puradmin13421 at http://www.fortnightly.comOpting Outhttp://www.fortnightly.com/fortnightly/2012/01/opting-out
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Providing reasonable options for customers who object to smart meters.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Stephen Hadden, Science Applications International Corp. (SAIC)</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Business &amp; Money</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Steve Hadden</b> (Stephen.C.Hadden@ saic.com) is managing consultant at SAIC.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - January 2012</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1201/images/1201-BIZ-fig1.jpg" width="1362" height="427" alt="" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/article_images/1201/images/1201-BIZ-fig2.jpg" width="2060" height="1535" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Public policy and substantial technical work support the premise that smart grid will produce many benefits for modern society. One way to describe smart grid is to say that it better manages the delivery of electric energy to improve efficiency and reliability. The old adage applies: “You can’t manage what you don’t measure.” Smart meters that measure electric energy flow are therefore one foundational element of most smart grid initiatives.</p>
<p>Of the several ways to communicate with a smart meter, radio has emerged as a dominant choice during the past decade because it’s economical and effective, and because it amply serves current needs while preserving the opportunity to do things that might become valuable in the future. But some people are concerned about smart meters for two reasons:</p>
<p>• <i>Health: </i>Smart meters with radios in them produce low-level radio emissions. The human health consequences—if any—of low-level radio emissions aren’t definitively known.</p>
<p>• <i>Privacy:</i> No matter what communication method is used, the meter data could potentially be misused to reveal private information about the energy customer, to the disadvantage of that customer.</p>
<p>Some of these concerned citizens seek to opt out of smart metering and, instead, continue to have their energy metered by non-communicating meters that are read manually. A few regulatory commissions in North America have considered this matter, and have decided that consumers should have that option. Some utilities, including City of Lakeland, Fla., BC Hydro, Delmarva Power, and several large utilities serving most of the consumers in Texas, have decided against providing opt-out alternatives. Many others haven’t yet made a decision, or even addressed the question. A significant problem faced by utilities is the array of web sites, news articles, videos, and other media that engage in sensational rumor mongering, spreading misleading or simply incorrect assertions. This is understandably confusing to consumers.</p>
<p>Should opt-out be allowed? If so, how can a utility allow some customers to opt out while preserving the benefits of smart meters and smart grid for all? What will be the most economical, equitable, and practical approach?</p>
<p>The impact of the question expands as smart meter deployments continue. According to Howard Scott, managing director of Cognyst Advisors, 42 million two-way electric and gas smart meters were in service in North America on July 1, 2011. About 35 million of these employ radio transmitters. Scott projects that the total number will be about 48 million at the end of 2011, and might continue increasing by about 1 million meters per month.</p>
<p>These health and privacy concerns didn’t become nationally visible until after major smart meter deployments were in process. The utilities that specified the smart meter features and functions, and the technology companies that developed the metering systems, had no firm basis for knowing that these concerns would become significant. Therefore, the ability of available meter automation systems to facilitate opt out is mixed. These capabilities might change over time, as utility requirements evolve and the developers augment the systems.</p>
<h4>RF and Public Health</h4>
<p>Advocates on each side of the health effects debate claim to have compelling evidence about whether non-ionizing, non-thermal radio emissions are either safe or harmful. But verifiable evidence has been insufficient to meet prevailing scientific standards for a convincing position. The California Council on Science and Technology said it well in a January 2011 report when it wrote, “Not enough is currently known about potential non-thermal impacts of radio frequency emissions to identify or recommend additional standards for such impacts.”</p>
<p>Automation advocates point out that the available metering systems meet Federal Communications Commission (FCC) standards limiting radio emissions that might be absorbed by humans. The FCC thresholds keep radio exposure below the level that will heat body tissue. In reply, opt-out proponents respond that FCC standards don’t contemplate or address other potential effects that might be of concern. Therefore compliance with FCC standards is good, but is insufficient to satisfy consumers concerned about yet-undiscovered, unproven effects.</p>
<p>The available evidence is good starting material to guide further inquiry. But it isn’t an unambiguous basis for current policy. Smart meter radio emissions are weak compared to other prevalent sources. From this we might infer that the risk of harm from smart meters is small compared to the risk from other things around us. Both risks are very small compared to other risks people commonly accept, like driving a car, riding a bicycle, or drinking alcohol, all of which risk incurring known, proven, and substantial harms.</p>
<p>In May 2011, the International Agency for Research on Cancer (IARC), a unit of the World Health Organization, reported conclusions of its most recent assessment of the potential of cell phones to cause cancer. The relevance of this to the smart meter safety debate is that radio emissions from cell phones, though much stronger, are otherwise broadly similar to emissions from smart meters. Opt-out proponents note that the IARC report places cell phones in the same risk category as other things that are widely believed to be hazardous, including chloroform, chlordane, and car exhaust. These are all things most of us would advise our children to avoid. In contrast, smart grid proponents note that this category also includes things that are widely regarded to have no significant hazard, including coffee, Asian pickled vegetables, talcum body powder, and extremely low frequency magnetic fields, such as one might receive when sleeping under an electric blanket or walking down a street where electric service wires are overhead.</p>
<p>Wireless engineering firm Pericle Communications of Colorado Springs, Colo., has served the utility and telecom industries since 1992 and has analyzed radio frequency exposure from smart meters for several clients. Referring to market research figures from CTIA-The Wireless Association showing that U.S. cell phone use has increased by nearly an order of magnitude in 15 years (from 34 million in 1995 to more than 322 million today), Jay M. Jacobsmeyer, president of Pericle Communications, says, “If low-level radio emissions cause harm to humans, one would expect to see reproducible evidence long before now.”</p>
<p>But vigorous efforts to establish such evidence have produced no clear demonstration of harm. Jacobsmeyer says that three clear facts indicate that smart meters are safe for humans. First, the effects of radio frequency exposure on humans have been extensively studied scientifically since before World War II. Second, the FCC defined and adopted its exposure limits after considering the available research. Smart meter exposure falls under FCC jurisdiction. And finally, due mostly to relatively low transmitter power and low transmit duty cycles, consumer exposure from deployed smart meters is far below the FCC limit, even in cases of multiple meters mounted on a single wall.</p>
<p>The overall point is that no health hazard associated with smart meters has been reproducibly found or verified, though a great deal of effort has been applied seeking such hazards. On the other hand, it hasn’t been proven that there’s no risk. The risk is low, lower than the risks associated with many things Americans do every day. For many people, including policy makers, the positive benefits of smart meters and smart grid are ample to motivate acceptance of this small risk.</p>
<h4>Privacy Worries</h4>
<p>Amid widespread concern about identity theft, some people fear that, once gathered by the utility, detailed meter data might be used to breach a customer’s privacy in substantive ways. For example, one YouTube video entitled “Smart Meters: A Little Too Smart?” claims that the data will show when the electric toothbrush is used and, by implication, reveal other minute details of private life. In fact, smart meters have never offered any prospect of this and, even if they did, the information would have little interest or value to an electric utility. But more substantive uses of electric energy, such as a pool pump or electric water heater, might be discernible in the data, and customers might reasonably wonder what, if anything, obliges a utility to protect such data with appropriate care.</p>
<p>Longstanding policy and precedent require utilities to keep customer data confidential. According to Eric Ackerman, director of alternative regulation at the Edison Electric Institute: “Investor-owned electric utilities have always protected the privacy of their customers. Since well before the advent of the smart grid they have had privacy policies, which are overseen by their regulators. It’s true that the smart grid presents significant new issues, which utilities must address by reviewing and updating existing policies and practices—and this process is well underway.”</p>
<p>Ackerman explains broadly that virtually all utility privacy policies include two core principles:</p>
<p>1) Distribution utilities must share customers’ energy usage data with contracted third party agents in order to bill for services and plan and operate reliable systems; and 2) Customers have the right to control whether any other third party is granted access to their data.</p>
<p>Some third parties act as agents for the utility to support essential functions, such as billing, tree trimming, and electric operations. Ackerman explains that the utility’s obligations become the agent’s obligations.</p>
<p>“Where a third party is acting as an agent for the utility—that is, doing work under contract to the utility—the contract specifies that the agent must honor the utility’s obligations, including its privacy rules, and in no event is allowed to retain customer data for uses other than those specified in the contract.”</p>
<p>The utility is allowed to share a customer’s data with any other third party only if the customer has specifically authorized it, Ackerman says.</p>
<p>Examples of these utility obligations to protect customer data are available by searching the Internet, as public utility commissions commonly post their rules on their web sites. For example, according to Bill Nugent, a former Maine commissioner and a past president of the National Association of Regulatory Utility Commissioners, utility protection of consumer data is a longstanding requirement in Maine, dating from the 1980s and earlier. Maine Public Utilities Commission rules require utilities to treat customer data as confidential. Nugent points to a Maine regulation <i>(Code of Maine Rules, 65 (Public Utilities Commission)-407 (General) Chapter 815 (Consumer Protection Standards for Electric and Gas Transmission and Distribution Utilities), Section 4 (Customer Privacy))</i> which states in part:</p>
<p>“A utility shall not disclose, sell or transfer … individual customer information, including, but not limited to … electricity or gas usage … without the consent of a customer.”</p>
<p>This is in striking contrast to very popular loyalty programs of consumer retail businesses, which are largely free to use customer data in any way that suits their purposes. In such loyalty programs—for example, Ace Hardware’s Ace Rewards, CVS’s ExtraCare, and Best Buy’s Reward Zone—retailers collect detailed information on the timing and content of consumers’ purchases, just as utilities will do with smart electric meters. The retailers use these data to analyze and optimize many aspects of their businesses, as utilities also will. All the retailers have privacy policies (readily available on their web sites), and most promise to keep customer data private. While they have compelling commercial reasons to follow their own policies, they’re free to change them at any time without notice and to use consumer data in whatever way is most profitable for them. Unlike utilities, the explicit constraints of rules and laws give commercial retailers ample room to take actions to which some consumers might object. This hasn’t stopped consumers from joining the programs in huge numbers and enjoying the benefits.</p>
<p>In summary, data privacy is a serious issue. Utilities are generally required by rules and laws to protect their consumers. High-resolution meter data might deserve even more rigorous privacy protection. If that’s necessary, existing precedents in utility rules and regulations establish a ready basis for drafting new rules. An active public dialogue will be appropriate to define any such new rules. Once they’re in place, privacy concerns need not be an obstacle to smart metering or smart grid.</p>
<h4>Solution Alternatives</h4>
<p>Many utilities and regulators have decided that no opt-out service will be offered. For those that do elect to offer such a service, the broad requirements are reasonably clear, but much detail remains unresolved. At a top level, the requirements are shown in Figure 1.</p>
<p>The utility’s requirements are principally driven by the potential to improve electric service and efficiency. The customers’ requirements are driven by the desire to avoid exposure to low-level radio waves.</p>
<p>It’s difficult to avoid exposure to low-level radio waves in the modern world. Even if one has no radio transmitters in the home, or even the neighborhood, radio waves blanket huge areas of North America from a wide variety of radio and television sources, telecommunication systems, public safety systems, household appliances, commercial security systems, the sun, orbiting satellites, and others. Much of this blanket operates continuously, creating a background that varies widely but isn’t zero, in many populated areas. National Public Radio reported on Sept. 14, 2011, that to escape this blanket, some individuals who believe they suffer from exposure to radio background are moving to an area of West Virginia that has been a federal radio quiet zone since 1958 to facilitate studying very low-level radio signals from space.</p>
<p>In such a pervasive radio blanket, it isn’t clear that it’s meaningful to completely eliminate occasional exposure to a very small radio source, such as a smart meter. Therefore, the various ways to implement an opt-out service include a few that incur very small and infrequent radio emissions, with others that produce zero emissions.</p>
<p>The present approaches to metering an opt-out customer include those summarized in Figure 2. In addition to the costs shown in Figure 2, these alternatives incur costs for some or all of the following:</p>
<p>• <i>Bolstering the meter communication network to make up for the fact that the opt-out meter isn’t supporting the data transfer functions of that network:</i> Smart meters commonly support each other by passing data from one to another. The opt-out meter won’t participate in such a mesh network, and this might require additional radio devices elsewhere in the network for proper system operation. In addition, other smart metering functions are compromised by opt-out accounts—outage restoration, for example—and this further increases utility costs.</p>
<p>• <i>Maintaining an additional meter type in the inventory, including the associated testing and maintenance equipment, and staff training to operate that equipment. </i></p>
<p>• <i>Establishing and maintaining one or more additional data schema in the utility meter data records. </i></p>
<p>• <i>Establishing and keeping records that separately identify and manage opt-out accounts. </i></p>
<p>• <i>Meter reading costs:</i> In some approaches, this can be reduced by having the customer read the meter some of the time. But this incurs some added cost to create and support that process, and to deal with the errors that occur when customers misread—or fail to read—their meters.</p>
<p>• <i>Call center operations to properly respond to calls about opt-out service, including staff training. </i></p>
<p>One possible approach to minimizing the manual meter reading costs for opt-out accounts is to have the customer read the meter and mail the reading to the utility. Many utilities have done this for years. Usually, the utility reads the meter quarterly or annually to confirm the accuracy of the readings. Electric meters can be difficult for customers to read, particularly those with mechanical dials, some of which rotate in confusing directions. Customer reads therefore have a higher error rate than utility reads, and this incurs costs for manual bill processing, estimated bills, and call center responses. The alternatives in Figure 2 assume the legacy meter and the simple digital meter can be read by the customer.</p>
<p>Aside from the scheduled remote read, all the approaches shown in Figure 2 are available and practical immediately. Scheduled remote read isn’t offered in any current smart metering system, and might not be a viable alternative, but this idea is mentioned as a conceptual illustration of how the versatility of smart meters might enable new services in the future. The core of the idea is that the meter remains radio-silent all the time, except for a scheduled time once a month when it communicates by radio just long enough to rejoin the meter network and transmit one month of meter data to the utility. This might potentially be scheduled when the customer is routinely away from home. No one has evaluated whether this can be developed and implemented by providers, is acceptable to opt-out consumers, and is operationally practical for utilities. If it is, creating it would incur development costs for network control and data management, and numerous other technical functions, all of which might take years to create. The possible benefits might be offset by operational limitations or development obstacles that haven’t yet been identified. The point is that, with further public dialogue, utilities and their customers might be able to leverage the flexibility and re-programmability of smart meters to everyone’s advantage.</p>
<p>The costs of opting out will be higher than one might expect. Smart meters will reduce utility operating costs or mitigate the continuing increase. This operating cost benefit will be reflected in the electric rates of participating consumers, just as the commercial retailers’ loyalty programs return benefits to their customers. By choosing to opt out, the opt-out customers are declining these benefits, and their electric service costs will be correspondingly higher.</p>
<p>The efficiencies of smart meters will be gained by pervasive business process changes within the utility. The processes supporting current metering and meter reading will be eliminated, and many closely related functions—<i>e.g.</i>, billing and call center operation—will be extensively revised. If opt-out customers wish to continue receiving the previous services, they must bear the cost of those services, which will no longer benefit from the economies of scale that previously applied.</p>
<p>Keeping the legacy meter is perhaps a good example of this. Many utility meters replaced in smart meter deployments are decades old, no longer produced or supported, technologically obsolete, and due for replacement soon whether smart meters are deployed or not. Keeping the old electro-mechanical meter might be compared to keeping an old computer. It might be comfortable to stay with what’s familiar, but if that item is no longer made or supported, the cost to keep using it will rise as fewer resources are available to service and operate it.</p>
<p>As the surrounding infrastructure and operations are modernized, it becomes expensive to continue operating and supporting old technology. For example, when an Internet service provider stops supporting dial-up connections, converting an old computer to accommodate a broadband connection can cost more than getting a new computer. Similarly, the metering technologies of the last century are unable to support the new ways utilities are beginning to operate, ways that will mitigate cost increases and improve electric delivery for all.</p>
<h4>Risks vs. Benefits</h4>
<p>From a technical standpoint, opting out of smart metering is entirely practical. But the cost for the opt-out customers won’t be trivial, and they will weigh that cost with their reasons to opt out. Privacy is a significant concern, but need not be an obstacle to smart metering if consumer protection needs are implemented in utility rules. This might already be the case in many jurisdictions. The debate about health effects of low-level radio emissions might not be resolved any time soon because such effects—if any exist—are either so small or so subtle that they’re comprehensively difficult to prove. For some customers, this justifies opting out of smart metering.</p>
<p>Utilities have addressed this issue in the past. In one example, in 2001 and 2002, the Littleton (Mass.) Electric Light Department (LELD) deployed drive-by metering to all 6,000 accounts. During the planning, a half dozen or so customers objected vociferously at the utility’s board meetings to the possible health consequences of the radios in the meters. LELD initiated a detailed investigation and commissioned an independent report, which found that the meter emissions are far below the emissions of other common household devices and that they conform to all applicable standards. The <i>Littleton Independent</i> newspaper described the town dialogue, quoting Savas Danos, LELD general manager: “‘This is a very complicated issue,’ … the meters [are] ‘safe, proven, efficient technology … It provides quality service and reduced cost to you, our customer.’” LELD commissioners allowed the objecting customers to opt out, agreeing that they would pay about $8 per month to have their meters read manually. When contacted for this article, Danos recalled the controversy.</p>
<p>“I can understand the concerns of those residents,” he said. “Change is hard for everyone.” Now, nine years after the deployment was completed, not a single LELD customer requires manual meter reads. “I think it took them a while to realize that the risk associated with the new meters is tiny compared to other risks that surround us all. The metering system has been a terrific investment and benefit for our customers.”</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/cis-billing">CIS &amp; Billing</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/customer-engagement">Customer Engagement</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/ami">AMI</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-opencalais-eventsfacts-tags field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">EventsFacts: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/events-facts/person-email-address">Person Email Address</a></li></ul></div><div class="field field-name-opencalais-position-tags field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Position: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/position/consultant">consultant</a></li></ul></div><div class="field field-name-opencalais-socialtags-tags field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">SocialTags: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/social-tags/electricity-distribution">Electricity distribution</a></li><li class="taxonomy-term-reference-1"><a href="/social-tags/electric-power">Electric power</a></li><li class="taxonomy-term-reference-2"><a href="/social-tags/electricity">Electricity</a></li><li class="taxonomy-term-reference-3"><a href="/social-tags/smart-meter">Smart meter</a></li><li class="taxonomy-term-reference-4"><a href="/social-tags/smart-grid">Smart grid</a></li><li class="taxonomy-term-reference-5"><a href="/social-tags/electricity-meter">Electricity meter</a></li><li class="taxonomy-term-reference-6"><a href="/social-tags/electrical-grid">Electrical grid</a></li><li class="taxonomy-term-reference-7"><a href="/social-tags/smart">Smart</a></li><li class="taxonomy-term-reference-8"><a href="/social-tags/advanced-metering-infrastructure">Advanced Metering Infrastructure</a></li></ul></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/business-money">Business &amp; Money</a></li></ul></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1201/images/1201-BIZ.jpg" width="511" height="600" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
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<a href="/tags/arc">ARC</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/bc-hydro">BC Hydro</a><span class="pur_comma">, </span><a href="/tags/benefits">Benefits</a><span class="pur_comma">, </span><a href="/tags/bill-nugent">Bill Nugent</a><span class="pur_comma">, </span><a href="/tags/california-council-science-and-technology">California Council on Science and Technology</a><span class="pur_comma">, </span><a href="/tags/city-lakeland">City of Lakeland</a><span class="pur_comma">, </span><a href="/tags/cognyst-advisors">Cognyst Advisors</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/communication">Communication</a><span class="pur_comma">, </span><a href="/tags/ctia">CTIA</a><span class="pur_comma">, </span><a href="/tags/customer-reads">Customer reads</a><span class="pur_comma">, </span><a href="/tags/delmarva-power">Delmarva Power</a><span class="pur_comma">, </span><a href="/tags/distribution">Distribution</a><span class="pur_comma">, </span><a href="/tags/edison-electric-institute">Edison Electric Institute</a><span class="pur_comma">, </span><a href="/tags/eric-ackerman">Eric Ackerman</a><span class="pur_comma">, </span><a href="/tags/fcc">FCC</a><span class="pur_comma">, </span><a href="/tags/federal-communications-commission">Federal Communications Commission</a><span class="pur_comma">, </span><a href="/tags/federal-communications-commission-fcc">Federal Communications Commission (FCC)</a><span class="pur_comma">, </span><a href="/tags/high-resolution-meter-data">High-resolution meter data</a><span class="pur_comma">, </span><a href="/tags/howard-scott">Howard Scott</a><span class="pur_comma">, </span><a href="/tags/hydro">Hydro</a><span class="pur_comma">, </span><a href="/tags/international-agency-research-cancer">International Agency for Research on Cancer</a><span class="pur_comma">, </span><a href="/tags/jay-m-jacobsmeyer">Jay M. Jacobsmeyer</a><span class="pur_comma">, </span><a href="/tags/leld">LELD</a><span class="pur_comma">, </span><a href="/tags/maine-public-utilities-commission">Maine Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/national-association-regulatory-utility-commissioners">National Association of Regulatory Utility Commissioners</a><span class="pur_comma">, </span><a href="/tags/pericle-communications">Pericle Communications</a><span class="pur_comma">, </span><a href="/tags/privacy">Privacy</a><span class="pur_comma">, </span><a href="/tags/public-policy">Public policy</a><span class="pur_comma">, </span><a href="/tags/smart-meter">Smart meter</a><span class="pur_comma">, </span><a href="/tags/smart-meters">Smart meters</a><span class="pur_comma">, </span><a href="/tags/smart-meters-little-too-smart">Smart Meters: A Little Too Smart?</a><span class="pur_comma">, </span><a href="/tags/technology">Technology</a><span class="pur_comma">, </span><a href="/tags/wireless-association">The Wireless Association</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/wireless-association-0">Wireless Association</a><span class="pur_comma">, </span><a href="/tags/world-health-organization">World Health Organization</a> </div>
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Sun, 01 Jan 2012 05:00:00 +0000puradmin13431 at http://www.fortnightly.comInteresting Timeshttp://www.fortnightly.com/fortnightly/2011/10/interesting-times
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Utilities stay the course in a volatile market.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Michael T. Burr</p>
</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><strong>Michael T. Burr</strong> is <i>Fortnightly’s</i> editor-in-chief. Email him at <a href="mailto:burr@pur.com">burr@pur.com</a>.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - October 2011</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1110/images/1110-fea1-fig1-2.jpg" width="1350" height="1697" alt="" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/article_images/1110/images/1110-fea1-fig3.jpg" width="1378" height="897" alt="" /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1110/images/1110-fea1-fig4.jpg" width="2064" height="2421" alt="" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/article_images/1110/images/1110-fea1-fig5.jpg" width="2058" height="1991" alt="" /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1110-FEA1-Bilicic.jpg" width="463" height="647" alt="“Some coal plants that are available for purchase ultimately might be worth more than people have considered.” – George Bilicic, Lazard" title="“Some coal plants that are available for purchase ultimately might be worth more than people have considered.” – George Bilicic, Lazard" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1110-FEA1-Einsenstat.jpg" width="1224" height="1668" alt="“If regulators want to facilitate development of new, cleaner energy projects, there are ways of getting it done.” – Larry Eisenstat, Dickstein Shapiro" title="“If regulators want to facilitate development of new, cleaner energy projects, there are ways of getting it done.” – Larry Eisenstat, Dickstein Shapiro" /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1110-FEA1-Kingston.jpg" width="924" height="1344" alt="“Utilities aren’t immune to volatility, but they’ve been among the first to recover.” – Tim Kingston, Goldman Sachs" title="“Utilities aren’t immune to volatility, but they’ve been among the first to recover.” – Tim Kingston, Goldman Sachs" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1110-FEA1-Napolitano.jpg" width="1504" height="1993" alt="“Until things become clearer, I expect utilities to take a time out rather than initiate mergers of equals.” – Frank Napolitano, RBC Capital Markets" title="“Until things become clearer, I expect utilities to take a time out rather than initiate mergers of equals.” – Frank Napolitano, RBC Capital Markets" /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1110-FEA1-Nastro.jpg" width="1071" height="1455" alt="“This is one of the few times I’ve seen where the stock prices of acquiring companies outperform their peer group.” – David Nastro, Morgan Stanley" title="“This is one of the few times I’ve seen where the stock prices of acquiring companies outperform their peer group.” – David Nastro, Morgan Stanley" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1110-FEA1-Redinger.jpg" width="812" height="1056" alt="“Investors have been clamoring for utility debt. There isn’t enough supply.” – Andy Redinger, KeyBanc Capital Markets" title="“Investors have been clamoring for utility debt. There isn’t enough supply.” – Andy Redinger, KeyBanc Capital Markets" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>This has always been a complex industry.</p>
<p>Many factors drive the successes and failures of the companies in the U.S. power and utility business. But today the industry faces historic challenges and complexities on almost every front—from technology to regulation to business strategy.</p>
<p>Ironically, the one area where utility companies seem to be enjoying relative tranquility is also the area where uncertainty has its greatest effect: finance.</p>
<p>It’s a truism that investors hate uncertainty, but uncertainty is a relative term. Amid the raging sea that is Wall Street these days, utilities represent a safe haven, with balance sheets based on steady cash flow and steel in the ground. As a result utilities have maintained easy access to low-cost capital, even in the worst of times <i>(see Figures 1 through 3)</i>.</p>
<p>At the same time, however, utilities and power companies face serious headwinds that will affect their future business prospects. To learn how banks and investors view these factors, <i>Fortnightly</i> spoke with eight finance executives and two industry lawyers:</p>
<p>• Jeff Holmstead, Bracewell &amp; Giuliani<br />• Larry Eisenstat, Dickstein Shapiro<br />• Tim Kingston, Goldman Sachs<br />• Andy Redinger, KeyBanc Capital Markets<br />• George Bilicic, Lazard Ltd.<br />• James Hempstead, Mike Haggerty and Ryan Wobbrock, Moody’s Investors Service<br />• David Nastro, Morgan Stanley<br />• Frank Napolitano, RBC Capital Markets</p>
<p> </p>
<p><b>Fortnightly: What trends do you see in capital market access and terms for utility and power companies? In particular, how has the financial turmoil since July affected financing for companies in this sector?</b></p>
<p><b>Kingston, Goldman Sachs:</b> There’s been a high level of investor interest in the utility and power sector despite the difficult times we’ve been through. Utilities aren’t immune to the kind of volatility we’ve seen in the equity markets recently, but they’ve been among the first to recover and have had relatively open access to the markets. Debt markets were enormously volatile in August, but our clients successfully priced debt transactions at historically low coupon rates, and in general utility companies saw their equity valuations recover faster than companies in other sectors.</p>
<p>There’s a focus on financial conservatism. Utilities that have been prudent and conservative in their financing plans are being rewarded with market access and historic low rates.</p>
<p><b>Redinger, KeyBanc:</b> Capital was more expensive during the financial turmoil a couple of years ago, but since the capital markets recovered, it’s never been better for the utility sector. Investors have been clamoring for utility debt. There isn’t enough supply, because bonus depreciation provisions have allowed utilities to avoid raising capital. So we’ve seen spreads tighten a bit, and it’s very easy for utilities to access capital.</p>
<p>Economic sentiment is changing toward greater concern about a double-dip recession, and that’s affected the capital markets in general. But quite frankly, it’s probably helped the demand for utility paper, because it’s seen as a defensive investment.</p>
<p><b>Nastro, Morgan Stanley: </b>Poor economic data has investors worried about a faltering economy and even a double dip recession. That has driven a rally in Treasuries in spite of the Federal Reserve’s quantitative easing program and S&amp;P’s downgrade of the U.S. government’s credit rating. Investors continue to show tremendous appetite for high quality credits in this uncertain environment. In short, there’s been a flight to quality. Buy-side investors are asking for long-dated, high-quality non-financial paper. We’ve seen nimble issuers accelerate their issuance timetables to take advantage of historically low rates and favorable terms. But given the market uncertainty and volatility, new issue windows have been largely day-to-day. In the utility sector, companies have issued five-year unsecured debt with coupon rates below 2 percent, and 10-year secured notes at around 3 percent.</p>
<p>At the same time, there has been a structural change in the bank market. Pricing for revolving credit has tightened across the ratings spectrum, which has resulted in a number of utilities refinancing their corporate bank facilities over the past year and extending the tenor. However, while supply and demand dynamics have driven the market tighter, we might see a floor in pricing due to regulatory capital changes and increasing cost of funds for lenders.</p>
<p>In terms of equity, the near-term cash benefits associated with bonus depreciation have limited the need for new issuance from the utility sector, outside of acquisition financing. New equity requirements have largely been pushed out by a year or two. This is a timing point, however, and doesn’t change the long-term need to right-size companies’ balance sheets and fund significant future capital requirements.</p>
<p>In the secondary market, utilities have maintained their defensive characteristic amidst a selloff in the broader markets, and have become the preferred hiding place for many investors looking for yield. That being said, we’re starting to see divergence in valuations within the utility space. The safety bid is now driving intra-sector price movements. Regulated utilities have outperformed hybrid companies, which have outperformed merchant generators, because investors have a strong preference for the largest, most liquid and safest names in the sector—especially those with decoupled regulatory frameworks, which provide protection from declining sales.</p>
<p>The volatility has most affected the high-yield debt market, where new issuance dramatically slowed in August and September. But given all-in cost of debt, it’s still attractive in a broader historical context. A number of IPPs took advantage of an attractive new issue window in May and June to restructure their balance sheets.</p>
<p><b>Bilicic, Lazard: </b>The power and utility industry in general has terrific access to the capital markets. We’d expect that access will continue to be strong and stable for the foreseeable future, particularly for companies that are regulated or mostly regulated. Access will be more intermittent and unpredictable for non-regulated companies, particularly those that aren’t publicly traded.</p>
<p><b>Napolitano, RBC:</b> It’s a world of haves and have-nots. The haves are investment-grade utilities, and they can exert their will on the bond buyers market because there’s a shortage of paper.</p>
<p>We started the year expecting $40 billion in bond issues for utilities, and the actual numbers are far below that. You can see the same thing on the equity side. There have been hardly any equity offers, except for deal-related capital. Because of bonus depreciation, companies have been able to defer issuing capital.</p>
<p><b>Hempstead, Moody’s:</b> Utilities’ financial metrics have been surprisingly steady over the last couple of years despite recessionary pressures. The capital markets remain open and welcoming, and utilities have been very successful in accessing the capital they need for low prices and attractive maturities. The focus now is on capital expenditures. Some companies are planning very high cap-ex over the next couple of years. We saw during the recession how utilities can ramp down cap-ex somewhat in a scenario where they can’t make spending commitments, and that’s a good tool. In the face of rising rates and a slow economic recovery, we see a more contentious regulatory environment building, and that could lead to political intervention in some situations.</p>
<p> </p>
<p><b>Fortnightly: New air quality rules are expected to drive investments in scrubbers and coal plant shutdowns. How do you see that driving cap-ex investments and generating resource plans?</b></p>
<p><b>Haggerty, Moody’s: </b>The Clean Air Act ‘Transport’ [renamed ‘Cross-State’] rules have been manageable and utilities should be prepared for them. But the EPA has the MACT [maximum achievable control technology] rules coming out in November, and they could have a more significant impact on costs, particularly for coal-based utilities. Some utilities have been quite vocal about the impact on rates and jobs if these rules unfold as the EPA currently envisions. But one could argue there were pressures on coal-fired generators already. There was talk a few years ago about putting a price on carbon emissions, and many people thought that would be here by 2012. So the pressure has been around for a while, and utilities that were watching from the sidelines are now becoming more aggressive in their opposition to EPA mandates.</p>
<p>We’re not concerned yet from a ratings standpoint, especially for companies that are operating in a regulatory environment that allows them to pass through costs. But there could be credit implications for companies that have more contentious relationships with regulators. We’ll see how the costs are incurred and passed on.</p>
<p><b>Kingston, Goldman Sachs:</b> What’s challenging for utilities is the pressure of required large capital expenditures on the one hand and the uncertainty on the other.</p>
<p><b>Holmstead, Bracewell &amp; Giuliani: </b>This is the interesting irony of the whole situation. If EPA had produced reasonable regulations on a reasonable deadline, there would be much more certainty. Utilities would begin to look seriously at their schedule for closing down some older coal-fired plants. We’ve already seen some of that, with turnover in large part caused by low natural gas prices. But because EPA has been so aggressive, much more attention has been focused on fighting EPA because companies don’t see a reasonable path forward to implement the new rules. When you have public utility commissions and independent system operators saying, ‘Hold on, we need to keep the lights on, and we can’t afford dramatic increases in rates,’ it creates a lot of political pressure. There’s been a big increase in efforts in the courts and in Congress to try to overturn EPA’s decisions.</p>
<p><b>Eisenstat, Dickstein Shapiro: </b>None of these regulations are a surprise. Certainly the EPA is trying to change things, but I believe the agency is acting in good faith to draft the best regulations it can. The nature of any new regulation is that the agency comes out with what it believes is the best place to start. I’m sure they could have taken a more extreme position.</p>
<p><b>Bilicic, Lazard:</b> A lot of coal plants might be around a little longer than some people think they will. They’re important for system integrity and in some regions it will be difficult to replace that capacity, given current market signals and rate pressures. As a result, some of the coal plants that are available for purchase may ultimately be worth more than people have possibly considered.</p>
<p> </p>
<p><b>Fortnightly: Several major corporate mergers are moving forward, and also many power plants and other assets are changing hands. Are we seeing a wave of M&amp;A, or is this activity driven by short-term factors? </b><i>(See Figure 4, “M&amp;A Snapshot.”) </i></p>
<p><b>Napolitano, RBC:</b> Right now companies are focused on their organic strategies, which might involve acquisitions of businesses or assets, but probably not merging companies or re-casting their business profile. A lot of things are happening in our sector right now, with a lot of uncertainty, so people are just taking stock and focusing on making sure their companies are running right. We’ve had financial turmoil, hurricanes, blackouts … until things become clearer, I expect utilities to take a time out rather than initiate mergers of equals. Then they’ll focus on M&amp;A as a tool to accelerate their organic growth, or to fit parts together based on what they think the rules of the road are going to be.</p>
<p><b>Bilicic, Lazard: </b>Our thoughts are about the same as they’ve been for the last 20 years. This industry is going to consolidate slowly and steadily. On average, there will be three or four public company mergers a year, and now maybe one more because today there are financial investors looking at acquiring utilities. In that regard, financial investors with the capability and interest in investing in the industry are looking across the map at opportunities to invest in existing publicly traded companies and their subsidiaries, as well as transmission assets, contracted generation facilities, renewables-based infrastructure, and others.</p>
<p>To be clear, we don’t see any transactional floodgate opening up. Nevertheless, there remains extraordinary pent-up interest in consolidation, but that interest always will be constrained by regulatory concerns, the peculiarities of the industry and by the long history of consolidation discussions in this industry. Those and other factors cause logical transactions to move forward at a reduced pace compared to what otherwise makes sense.</p>
<p>On the asset front, you will see an ongoing movement of assets from one owner to another, and from time to time that will mean a non-regulated asset will move into regulated rate base because it’s the right resource-planning decision. There is a very high churn factor in this area of transaction activity. We also continue to think the presence of a non-regulated generation business attached to a regulated utility will raise a strategic question about whether those two businesses belong under the same holding company. The non-regulated business is very cyclical, and that’s different from the regulated business. Capital allocation questions also need to be addressed very differently.</p>
<p><b>Eisenstat, Dickstein Shapiro:</b> Right now regulated returns look pretty good to the financial markets. People have become very risk averse, both politically and financially. That increases pressure on the independent side of the business and gives an advantage to regulated utilities.</p>
<p><b>Wobbrock, Moody’s: </b>The industrial logic behind consolidation makes a lot of sense. This is a highly fragmented industry, and it makes sense for companies to get bigger and spread costs across a larger platform, and gain access to lower-cost capital. Also where companies change the business mix to provide a more predictable cash flow, that will reduce the risk profile of the company. We expect to see more of that activity in the future.</p>
<p><b>Nastro, Morgan Stanley:</b> The catalysts are all in place for continued M&amp;A activity. Capital is still cheap and readily available; companies have large cap-ex plans; and, in the near to mid-term, we expect only modest growth, which is a challenge especially for a commodity-linked business. These catalysts are prompting utilities to seek larger balance sheets. In addition, if a utility deal has demonstrated strategic logic and has the opportunity to create value, then equity investors are rewarding acquiring companies. This is one of the few times I’ve seen where the stock prices of acquiring companies have outperformed their peer group and the broader utility index. That market reaction helps give management teams the incentive to look at strategic opportunities.</p>
<p><b>Redinger, KeyBanc: </b>There are more people thinking about strategic transactions now than in the near past. Companies are looking to find a strategic partner that they can execute a deal with, and produce a win-win situation for shareholders and ratepayers. It comes down to regulatory risk, as it always does.</p>
<p><b>Fortnightly: </b>Some recent deals are moving forward more quickly than some earlier utility mergers did. Is it true that regulators are more amenable to mergers today, because they see rates going up in the future as a result of rising commodity prices and cap-ex requirements?</p>
<p><b>Nastro, Morgan Stanley: </b>We’re seeing a more constructive regulatory approval process. Regulators recognize there’s a need for balance sheet strength to finance large cap-ex requirements. And utilities are making commitments to preserve jobs, so that takes that issue off the table. Regulatory approvals are getting done on a more expedited manner. The FirstEnergy-Allegheny merger was approved by four states in 12 months. When PPL acquired E.On in Kentucky, they got approvals from three states in six months. These recent precedents help give utility boards the confidence to proceed with well-conceived combinations.</p>
<p><b>Redinger, KeyBanc:</b> I haven’t seen direct evidence that regulators are more amenable, but that’s the thinking in the industry. On a macro level it makes sense, but it depends on what’s going on in a given state at that point. So many factors come into play.</p>
<p> </p>
<p><b>Fortnightly: Isn’t it unusual for companies to engage in M&amp;A during a time of such turmoil in the financial markets?</b></p>
<p><b>Kingston, Goldman Sachs: </b>During the recent volatility, if you look at individual deals, generally you’ll see that they’re announced at times of relative calm. Large cash deals are difficult in this environment. The alternative is to do a stock-for-stock transaction. If the relative valuation is right, both stocks will move up and down together in the market.</p>
<p>This type of M&amp;A activity is further proof of the resiliency of our sector, despite the global turmoil.</p>
<p><b>Napolitano, RBC:</b> In terms of asset sales, the question is what’s driving the sellers, given the fundamentals of low prices for gas and power? In some cases the sellers are private equity funds or hedge funds that acquired assets through debt exchanges. They might be driven by technical factors involving timing or strategy. A fund’s strategy might change and that can mean a decision to liquidate assets. We’ve also had corporate sellers with changing strategies or financial drivers.</p>
<p><b>Nastro, Morgan Stanley:</b> Companies are looking at their portfolios and asking whether they have the optimal business structure. Hybrids are trading at a discount to regulated companies, so some utilities are looking to sell off non-regulated assets to help mitigate that valuation discount. Other companies are looking at non-core assets as a source of funding. They still need to finance the equity component of their cap-ex programs, and bonus depreciation won’t always be available.</p>
<p> </p>
<p><b>Fortnightly: Much of the asset-related financing activity in the past couple of years has involved renewable power plants, both for acquisitions and new development. But federal incentives seem unlikely to continue at their current levels. Is the renewable energy business headed for a downturn and a shakeup? </b></p>
<p><b>Redinger, KeyBanc:</b> The renewable industry is largely financed in the bank market. This is the last year before the cash grant expires, so a slew of projects are rushing to get financing before the end of the year. However, that’s being affected by what’s happening in Europe. The European banks were very important players in financing renewable energy in the United States, and there are now clouds on the horizon.</p>
<p>A lot of federal incentives are expiring or going away for renewables, and developers are trying to come up with alternative financing vehicles to take the place of those incentives. Some people are talking about REITs and MLPs [real estate investment trusts and master limited partnerships]. Renewable projects don’t qualify for those structures now, but if they did, it would open a new source of capital that’s attractively priced. We’re at the point now where the renewable sector needs to think about ways to finance projects through other investment vehicles. And the government would be well served by, instead of only providing direct incentives, to allow these things to be financed with a REIT or MLP.</p>
<p><b>Eisenstat, Dickstein Shapiro:</b> Allowing REIT or MLP financing would help. Extending the grants in lieu of tax credits also would help, but who knows how long that will last? If you’re looking to have a long-term presence in renewable energy development, then you need long-term power purchase agreements (PPA) and transmission commitments. In many states it’s quite difficult to get a PPA, and transmission is difficult to arrange. There’s still a lot of headroom in existing RPS requirements, but fewer purchasers are inclined to enter long-term contracts. Without those things, it’s very problematic.</p>
<p>It comes down to what the regulators want. If they want to facilitate the development of new, cleaner, more efficient energy projects, then there are ways of getting it done. Right now there’s extraordinary political and regulatory uncertainty.</p>
<p><b>Napolitano, RBC: </b>If the federal balance sheet can no longer afford subsidies for renewables, then there may be a wave of consolidation coming. There are a large number of players in that space. If the incentives aren’t there, and PPAs aren’t there, then what’s left? We might see consolidation to achieve operational economies of scale.</p>
<p><b>Nastro, Morgan Stanley: </b>We see a number of headwinds facing the renewable sector. On the wind side, the capital markets aren’t closed, but investors are very valuation-sensitive. Current public market trading levels suggest that spinning wind assets are trading below book value, and development projects only have value if they are in late stages, with attractive PPAs and return profiles.</p>
<p>If the window closes for renewables to access the public markets, then we’d expect to see increasing consolidation, which would favor companies with a lower cost of capital and a global value chain. Specifically, several Asian companies represent a new pool of capital looking to expand in U.S. markets, and are seeking to exploit their technological and cost advantages.</p>
<p>The solar market is different. We’ve seen an enormous increase in installed capacity. Solar projects are expected to reach 24 GW in 2013. Solar had been driven more by government and regulatory support, but declining prices and maturing technologies have made solar more bankable today. There’s still project financing available for high-quality projects located in stable regulatory environments with RPS requirements. At this point, there’s more support for solar than for wind, and that’s where many renewable energy investors are spending their time.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/strategy-planning">Strategy &amp; Planning</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/stocks-equity-markets">Stocks / Equity Markets</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/bonds-debt-markets">Bonds / Debt Markets</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1110/images/1110-fea1.jpg" width="960" height="700" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/andy-redinger">Andy Redinger</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/capital-market-access-and-terms">capital market access and terms</a><span class="pur_comma">, </span><a href="/tags/cash-flow">cash flow</a><span class="pur_comma">, </span><a href="/tags/clean-air-act">Clean Air Act</a><span class="pur_comma">, </span><a href="/tags/congress">Congress</a><span class="pur_comma">, </span><a href="/tags/david-nastro">David Nastro</a><span class="pur_comma">, </span><a href="/tags/debt-markets">Debt markets</a><span class="pur_comma">, </span><a href="/tags/dickstein-shapiro">Dickstein Shapiro</a><span class="pur_comma">, </span><a href="/tags/eon">E.On</a><span class="pur_comma">, </span><a href="/tags/epa">EPA</a><span class="pur_comma">, </span><a href="/tags/federal-reserve">Federal Reserve</a><span class="pur_comma">, </span><a href="/tags/firstenergy">FirstEnergy</a><span class="pur_comma">, </span><a href="/tags/frank-napolitano">Frank Napolitano</a><span class="pur_comma">, </span><a href="/tags/george-bilicic">George Bilicic</a><span class="pur_comma">, </span><a href="/tags/goldman-sachs">Goldman Sachs</a><span class="pur_comma">, </span><a href="/tags/holmstead">Holmstead</a><span class="pur_comma">, </span><a href="/tags/ipp">IPP</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/james-hempstead">James Hempstead</a><span class="pur_comma">, </span><a href="/tags/jeff-holmstead">Jeff Holmstead</a><span class="pur_comma">, </span><a href="/tags/keybanc">KeyBanc</a><span class="pur_comma">, </span><a href="/tags/keybanc-capital-markets">KeyBanc Capital Markets</a><span class="pur_comma">, </span><a href="/tags/larry-eisenstat">Larry Eisenstat</a><span class="pur_comma">, </span><a href="/tags/lazard-ltd">Lazard Ltd.</a><span class="pur_comma">, </span><a href="/tags/mact">MACT</a><span class="pur_comma">, </span><a href="/tags/mike-haggerty">Mike Haggerty</a><span class="pur_comma">, </span><a href="/tags/mlp">MLP</a><span class="pur_comma">, </span><a href="/tags/morgan-stanley">Morgan Stanley</a><span class="pur_comma">, </span><a href="/tags/ppa">PPA</a><span class="pur_comma">, </span><a href="/tags/ppl">PPL</a><span class="pur_comma">, </span><a href="/tags/rbc">RBC</a><span class="pur_comma">, </span><a href="/tags/rbc-capital-markets">RBC Capital Markets</a><span class="pur_comma">, </span><a href="/tags/reit">REIT</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/rps">RPS</a><span class="pur_comma">, </span><a href="/tags/ryan-wobbrock">Ryan Wobbrock</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/tim-kingston">Tim Kingston</a> </div>
</div>
Sat, 01 Oct 2011 04:00:00 +0000puradmin13515 at http://www.fortnightly.comCrossing the Thresholdhttp://www.fortnightly.com/fortnightly/2011/09/crossing-threshold
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Technology opens customers’ homes to utility services.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Matt Dinsmore and Laurence Wong</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Business &amp; Money</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Matt Dinsmore</b> is the director of the energy and clean tech practice at management consultancy Altman Vilandrie &amp; Co., and <b>Laurence Wong</b> is a manager in the energy and clean tech practice.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - September 2011</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1109-BIZ-fig1.jpg" width="2068" height="569" alt="" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1109-BIZ-fig2.jpg" width="1392" height="593" alt="" /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1109-BIZ-fig3.jpg" width="2068" height="961" alt="" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1109-BIZ-fig4.jpg" width="2070" height="1500" alt="" /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1109-BIZ-fig5.jpg" width="1370" height="815" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Utilities are charting their role and next steps as they determine just how (or whether) they should move into new home-based energy services or transition beyond the meter to achieve new operational benefits. Utilities are looking beyond the meter to enable new revenue opportunities, and improve performance in time-of-use, critical-peak, real-time pricing and demand response programs. In these early stages much of that discussion has focused on the technology side of the debate, with numerous questions gaining attention. Should we be using public networks (<i>e.g.</i>, Verizon, ATT) or private networks (<i>e.g.</i>, Silver Spring, Sensus, Elster, L&amp;G, Itron OpenWay, etc.) for our advanced metering infrastructure (AMI) deployments? What should be used for home energy management (HEM) connectivity—<i>i.e.</i>, the AMI network or consumer broadband? What are the emerging standards going to look like—<i>i.e.</i>, Zigbee, Z-Wave, Wi-Fi—for HEM communications? What features should the meter have—<i>i.e.</i>, 15-minute increment storage, remote connect and disconnect, etc.?</p>
<p>While both the operational and technology considerations are very important, utilities must engage and satisfy customers’ interest to ultimately drive adoption of new beyond-the-meter models and services. In-home service delivery models are a vastly different ballgame from the standard operational model in the utility industry. Utilities are accustomed to a very clean point of service demarcation—the meter. Anything upstream is the utility’s problem, anything downstream, call an electrician.</p>
<p>There are challenges and opportunities posed by new service models once we cross the threshold into the consumer’s home, where utilities face new customer economics and shifting financial realities. Utilities need an economic rationale that balances the lifetime cost of providing the in-home product or service against the value returned over the life of the product or service. These new realities demand new economic models across the entire customer engagement support structure: marketing, sales, provisioning, installation and customer support. For utilities to be major players in this ecosystem, they will require a careful understanding of the full service delivery model, and an analysis of which combination of customer engagement models, processes and technologies to invest in, develop, or to partner in, to deploy this new structure.</p>
<p>Looking across the full framework of customer lifecycle management <i>(see Figure 1)</i> raises a series of key questions that must be answered if an in-home product or service is to succeed. For example: How do we select and craft the right set of products or services that align with the use cases of our customers? How do we educate a varied group of consumers about the benefits that matter most to each of them, so that we drive sufficient adoption and acceptance? What’s required to ensure that the installation and provisioning experience is a positive one? How do we continue a positive customer experience over the life of the program or product to sustain active participation? What new protocols and business functions do we need to build internally or outsource? How do we do all of this in the most cost effective manner possible? Is it still too expensive to be justifiable?</p>
<p>These service model considerations have long been the marketing and service focuses of many of the entrants now being drawn to this attractive new ecosystem—<i>e.g.</i>, consumer electronics makers like Sony and Control4; home appliance manufacturers like LG and Samsung; retailers like Best Buy; and communication service providers like Comcast and Verizon.</p>
<p>These alternative hybrid and direct-to-consumer players <i>(see Figure 2)</i> offer well-differentiated products and services and have collectively spent billions of dollars refining product marketing, sales and service models that have become the de-facto standard experience for consumers. In competitive markets, utilities will have to compete against this model. In traditional markets, utilities will have to compete against the expectations that this model has set. What’s more, these new market entrants might offer use cases for customers that might not align well with utilities’ interests. The key decision makers for many of these new products and services ultimately will be consumers, not utilities.</p>
<p>For example, solutions offered by these new entrants that promote efficient and high use of distributed generation might reduce user consumption during low-cost off-peak periods—potentially eroding a utility’s revenue base—but they provide no significant mitigation during peaking events. The success of these new entrants threatens utilities’ ability to achieve value from this market. If utilities are going to successfully cross beyond the meter and compete in the in-home energy product and service markets, they’ll need to consider the full service model and the financial realities of what’s achievable.</p>
<p>While there are obvious differences between the electric utility industry and other industries such as broadband or home security, there are also many parallels. Comparing in-home services and the economics from those more mature industries can help utilities to identify areas in the service model that will pose the greatest challenges as in-home product and service markets develop <i>(see Figure 3)</i>.</p>
<h4>Marketing Beyond the Meter</h4>
<p>Successfully crossing beyond the meter into the home will require robust go-to-market strategies including advanced marketing and intelligence, customer segmentation, pricing strategies and customer-based product development. These requirements significantly change the dynamics for the utility’s offering in home products and services.</p>
<p>The utility will no longer enjoy an incumbent position and will need to ensure its product and service offerings are as compelling as those of its competitors. While utilities do have significant advantages as energy providers, other market entrants will also bring unique capabilities to the table.</p>
<p>An in-home product or service won’t be a commodity, where the only differentiator is price and where the use case is transparent. Utilities will need to acknowledge a variety of customers, preferences and use cases and create flexible options. Targeting the better customers for a given product or service, rather than taking a one-size-fits-all approach, will be crucial.</p>
<p>The in-home product and service market will evolve faster than existing utility businesses do. Utilities can’t assume that an in-home product or service will be sufficient for a sustained period; it might look more like traditional consumer electronics with rapid development cycles. Most mobile phone, television and computer models, for example, are refreshed each year with significant new technology and capabilities. As with other consumer-facing products, constant R&amp;D investments are required as consumers’ perspectives, behaviors and in-home technologies evolve.</p>
<p>In other industries where these dynamics already exist, go-to-market strategies involve constant application of advanced marketing techniques such as:</p>
<p><b>• People:</b> Focus groups, surveys, channels for customer feedback and other customer intelligence gathering methods. Deep market segmentation and custom analytics to structure the characteristics, preferences and behaviors of identifiable groups that can be targeted with marketing messages, pricing models and product features and functionality.</p>
<p><b>• Product:</b> Product development and packaging of offers that explicitly appeal to customer preferences and use cases—not exclusively to the operational goals of the company selling the product.</p>
<p><b>• Pricing:</b> Sophisticated and varied pricing models that can be used to improve penetration and yield for different segments.</p>
<p><b>• Promote, Placement:</b> Crafting the marketing messages that best convey the value propositions that align with customer preferences and are delivered consistently and clearly through the appropriate media.</p>
<p>As an example, consider an existing customer-facing service delivered by utilities: demand-side management (DSM). A DSM program that offers a $5 per-month rebate to curtail load for a specific period of time is not atypical. Assume through this program that the utility would like to attract enough customers to aggregate 15 MW of peak capacity for the year with a wholesale value of $750,000. If the customer base is segmented as illustrated in Figure 4—which charts consumers’ “likelihood to participate” against peak energy use—a clear target audience emerges (top right): high-energy consumers who are also highly likely to participate in the program.</p>
<p>While all the consumers in this top-right quadrant are good candidates for DSM programs, there are likely identifiable sub-segment clusters such as the “interested middle” and “big green” groups. Additionally, there are a large number of high-usage customers, the “non-interested majority,” who, while not interested in the program, are of high value to the utility. Each segment requires a different sign-up incentive, which implies different effort and varied pay-back levels for the utility. However, the vast majority of DSM programs today provide the same or very similar incentives. This causes a sub-optimal outcome with the utility spending more than required to achieve the target 15 MW capacity from the program. Using this segmentation example, utilities could attract 10,000 participants at a lower cost, instead of 15,000 people, by targeting higher peak-usage customers, or could convert the lowest-cost 12,500 users by targeting customers that are most likely to participate.</p>
<p>If we examine the customer acquisition costs of other mature in-home services we find that marketing is the single largest cost and can range from $100 up to $450 per customer. Utilities might have a marketing advantage because all potential customers of in-home products or services are existing energy account holders. Yet most utilities also have smaller market footprints than most major providers of mature in-home services. For example, the largest investor-owned utility is PG&amp;E with 5 million electric customers and 4.3 million gas customers. AT&amp;T had 95.5 million wireless subscribers in 2010. Utilities ultimately will need to greatly enhance their marketing capabilities as they are among the most important drivers and costs of customer acquisition.</p>
<h4>Sales Strategies</h4>
<p>With the exception of the 16 U.S. markets with retail competition, most utilities are true monopoly incumbents that typically don’t employ multi-channel customer acquisition strategies. Moving beyond the meter into a competitive in-home energy product and service market requires greatly expanding the breadth of the sales strategy. To compete effectively, utilities need to consider a varied set of sales channels including direct, online, retail, and resellers, each of which brings a unique set of economics, reach and advantages.</p>
<p>Determining the correct sales strategy and channel mix for utility entry into the in-home energy products and services market will largely depend on the goals of the services and the receptivity of the various consumer segments comprising each utility footprint. If goals for market penetration are modest and consumers within a given market are highly receptive to the product or service, then augmenting the call-center direct sales channel might be all that’s required. As goals become more aggressive, reach might need to be extended using retail channels and resellers. However, in all cases utilities will need to build capabilities and organizations to support their sales efforts.</p>
<p>For example, if a utility decides to go direct to the consumer, clear changes need to occur to existing call centers. Right now a utility’s call center receives calls for four main reasons—new service sign-ups, disconnects, billing questions and outage reporting. In a beyond-the-meter world, time and money is required to convert customer-service reps into sales consultants so they know how to engage with customers to identify the correct products and services for a given customer and to help up-sell them if the call was inbound. This is a completely different cost model in terms of training, support and sales incentives.</p>
<p>However, if we think that a direct sales strategy won’t yield the desired customer participation, leveraging big box retailers, such as home improvement stores or electronics stores, is another viable option. In retail environments, customers are expecting to learn about and potentially purchase new products and services, making them much more receptive than when they’re calling in for a billing or care concern, or being pulled from some other activity to receive a sales call. And resale channels—while expensive because a commission is paid for each new customer—are also viable for high-value target customers. For example, targeting the top 7 to 18 percent of electricity consuming homes <i>(see Figure 5, three columns on right)</i> could be ideal for reseller channels that have existing access to those segments.</p>
<p>For both retail and reseller channels, the utility doesn’t need to build a customer-facing sales organization. However, account management and product marketing capabilities and organizations are needed to ensure these channels present correct messaging, properly educate new customers, set realistic expectations and provide cost-effective yields.</p>
<p>Examining other mature markets also reveals that sales costs per new customer are significantly less than marketing, ranging anywhere from a negligible spend up to $125. With the exception of direct retail—<i>i.e.</i>, brick-and-mortar stores—sales costs generally are highly variable and incurred only for successful sales. However, account management can be impacted by utilities’ relative lack of scale, as most prominent retailers operate on a national or regional level.</p>
<h4>Provisioning &amp; Installation</h4>
<p>Utilities today are responsible for provisioning and installing their own field equipment, and the clear point of demarcation is the meter. The vast majority of these installations require a crew and truck to be dispatched, where the bulk of the work is done on-site. This approach, while perfectly appropriate for traditional utility owned properties, isn’t well suited for the beyond-the-meter market.</p>
<p>When utilities venture beyond the meter, installing home-based connections, appliances and software, new service models must include provisioning software and operational methods and procedures (M&amp;P) that minimize the time—and therefore cost—of provisioning and installation. If provisioning and installation aren’t optimized, the economics of providing in-home services are greatly impaired, requiring many months or even years to pay back the costs.</p>
<p>DSL broadband service from telcos in the early days is a good example of the not-so-hidden costs of provisioning and installation. In 2001, when broadband demand was beginning to take off, the telco DSL offer was notoriously difficult to provision with an average installation time of 2 hours 10 minutes, and a cost of anywhere from $600 to $1,500 per subscriber.<sup>1</sup> With a per-subscriber revenue between $40 and 60 per month and a gross margin of approximately 80 percent, the payback period ranged from 13 to 47 months—quite a wide range and not competitive with cable modem service at the high end.</p>
<p>Identifying this disadvantage early, telcos such as Qwest, SBC and Bellsouth (the latter two now merged as AT&amp;T) took several steps to reduce costs and ensure a positive customer experience, including aggressively promoting customer self-installation; putting in place M&amp;P standards, such as technical prequalification, to ensure self-install had a high success rate; and optimizing DSL modem technology with protocol standards to minimize configuration and compatibility hurdles.</p>
<p>These changes lowered installation costs enough to make DSL a consistently competitive market option while also improving the customer provisioning and installation experience.</p>
<p>While self-installation might not be feasible for some in-home solutions, minimizing the burden of provisioning and installation will be imperative, especially given that in-home energy services will be focused on just a fraction of consumer usage or demand. These services will produce a lower dollar value per month—about a $10 to 15 value is typical—compared to other in-home services, such as broadband (about $50 revenue), or security (about $30 revenue). Before utilities contemplate crossing beyond the meter into the home, we must be well prepared with the service infrastructure in place to ensure a low-cost and positive customer experience.</p>
<h4>Support &amp; Care</h4>
<p>Utilities have excellent support and care capabilities for the core business of providing reliable electricity and generally are very responsive to service calls and outages. However, there are significant new requirements beyond the meter that aren’t being fully considered by most of the industry and need to be addressed to successfully provide in-home products and services.</p>
<p>Support isn’t simply fielding service calls, diagnosing the issue and dispatching the right crew with the right equipment to the right spot—all things that utilities do a very good job of upstream of the meter. A support model is an essential part of the overall service delivery model, without which utilities will be ill-prepared for the deluge of service calls and issues that will arrive once service extends into the home. A minimum level of these service calls is inevitable when services become less transparent and more intertwined with customers’ day-to-day activities. Utilities need to adopt a corresponding support model that can efficiently and effectively field these calls, quickly filter out the many false positives that result from user error, and then conduct meaningful and deep preliminary remote diagnostics and troubleshooting. Without these capabilities utilities will be at risk of overburdening their field services force and will incur significantly higher costs than is necessary.</p>
<p>In more mature in-home services, such as security, high-speed Internet or cable television, customer service reps can troubleshoot a remarkable number of problems remotely, including settings on the customer’s in-home equipment, rebooting the equipment, etc. These capabilities didn’t happen overnight, nor did they happen without a well thought-out service delivery model. These companies have spent significant time and money with the vendor community putting the right tools and processes into the equipment so these services can be performed remotely.</p>
<p>Crossing the threshold into the home isn’t an easy path for any utility. Yet this market has been navigated by others who, through a combination of targeted service offerings, segmentation, pricing, and support models, have successfully addressed the hurdles that utilities now face. Home energy anagement programs and services might be challenging for utilities, but they are potentially important and lucrative. The models for capturing this opportunity are ready to be examined, retooled and applied.</p>
<p> </p>
<h4>Endnote:</h4>
<p>1. Alan Stewart, “America’s Network,” 2001</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/customer-engagement">Customer Engagement</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/dr-conservation">DR &amp; Conservation</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/ami">AMI</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/business-money">Business &amp; Money</a></li></ul></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1109-BIZ.jpg" width="1202" height="1500" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
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<a href="/tags/advanced-metering-infrastructure">Advanced metering infrastructure</a><span class="pur_comma">, </span><a href="/tags/ami">AMI</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/dsm">DSM</a><span class="pur_comma">, </span><a href="/tags/elster">Elster</a><span class="pur_comma">, </span><a href="/tags/focus-groups">Focus groups</a><span class="pur_comma">, </span><a href="/tags/installation">Installation</a><span class="pur_comma">, </span><a href="/tags/itron">Itron</a><span class="pur_comma">, </span><a href="/tags/network">Network</a><span class="pur_comma">, </span><a href="/tags/openway">OpenWay</a><span class="pur_comma">, </span><a href="/tags/product-development">Product development</a><span class="pur_comma">, </span><a href="/tags/sensus">Sensus</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/verizon">Verizon</a><span class="pur_comma">, </span><a href="/tags/zigbee">Zigbee</a> </div>
</div>
Thu, 01 Sep 2011 04:00:00 +0000puradmin13549 at http://www.fortnightly.comVendor Neutralhttp://www.fortnightly.com/fortnightly/2011/06/vendor-neutral
<div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Vendor Neutral</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - June 2011</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1106-VENpic1.jpg" width="1200" height="800" alt="ABB is investing $90 million to build a new high-voltage cable factory in Huntersville, N.C." title="ABB is investing $90 million to build a new high-voltage cable factory in Huntersville, N.C." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1106-VENpic2.jpg" width="640" height="425" alt="Survalent Technology commissioned a new SCADA system for the Golden Spread Electric Cooperative Antelope Station. Antelope Station is a gas-fired power plant with 18 9-MW gensets capable of generating about 170 MW, allowing the plant to quickly respond to regional capacity requirements.The SCADA system includes Survalent’s open system applications." title="Survalent Technology commissioned a new SCADA system for the Golden Spread Electric Cooperative Antelope Station. Antelope Station is a gas-fired power plant with 18 9-MW gensets capable of generating about 170 MW, allowing the plant to quickly respond to regional capacity requirements.The SCADA system includes Survalent’s open system applications." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1106-VENpic3.jpg" width="1008" height="692" alt="Dynamic Solar completed a 250-kW solar system in Philadelphia, Pa., for the Philadelphia Water Department. Dynamic Solar teamed with CETCO Contracting Services and Nucero Electric to design, engineer and install the 250-kW ground mounted system. The array is located at the Southeast Water Pollution Control Plant and is expected to generate approximately 330,000 kWh of solar electricity per year." title="Dynamic Solar completed a 250-kW solar system in Philadelphia, Pa., for the Philadelphia Water Department. Dynamic Solar teamed with CETCO Contracting Services and Nucero Electric to design, engineer and install the 250-kW ground mounted system. The array is located at the Southeast Water Pollution Control Plant and is expected to generate approximately 330,000 kWh of solar electricity per year." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1105-VENpic4.jpg" width="730" height="547" alt="Chevron Mining Inc. recently began operating a 1-MW concentrating solar photovoltaic (CPV) power plant at the tailing site of its molybdenum mine in Questa, N.M. The 20-acre facility includes 172 solar trackers. Kit Carson Electric Cooperative is buying the output under a power purchase agreement." title="Chevron Mining Inc. recently began operating a 1-MW concentrating solar photovoltaic (CPV) power plant at the tailing site of its molybdenum mine in Questa, N.M. The 20-acre facility includes 172 solar trackers. Kit Carson Electric Cooperative is buying the output under a power purchase agreement." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1105-VENpic5.jpg" width="922" height="1143" alt="Caithness Energy and GE Energy Financial Services sold part of the 845-MW Shepherds Flat wind project to Google, ITOCHU and Sumitomo." title="Caithness Energy and GE Energy Financial Services sold part of the 845-MW Shepherds Flat wind project to Google, ITOCHU and Sumitomo." /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><h4>T&amp;D</h4>
<p><span class="boldred">ABB</span> broke ground for a new high-voltage cable factory in Huntersville, N.C. The new facility, located at the Commerce Station Business Park, will supply high-voltage and extra high-voltage transmission cables to carry electric power underground. ABB says the factory will produce “smart grid-compliant cables,” for use in both AC and DC applications. ABB is investing approximately $90 million in the new manufacturing facility, which is the newest addition to Charlotte’s Energy Hub economic development initiative.</p>
<p><span class="boldred">ABB</span> launched its latest generation 245-kV ELK-14 series of gas insulated switchgear (GIS). ABB says the footprint of this latest GIS product is 40 percent smaller than conventional designs and it uses 20 percent less SF6 gas compared to the previous generation, making it more environmentally friendly. The unit can be delivered as an assembled bay, fully tested and mounted on a frame, which ABB says reduces installation time. Control and protection equipment installed in the control cubicle directly at the bay also is intended to enable smart grid integration. The systems were designed for a rated voltage of 253 kV, with a maximum current rating of 3,150 amps.</p>
<p><span class="boldred">Duke Energy</span> and <span class="boldred">American Transmission Co.</span> (ATC) created the Duke-American Transmission Co. (DATC), a joint venture that will build, own and operate new electric transmission infrastructure in North America. The joint venture will operate as a transmission utility. As a result, it will be subject to the rules and regulations of the Federal Energy Regulatory Commission, MISO, PJM and various other independent system (grid) operators, as well as any states in which DATC develops projects. Per the structure of their new joint venture, Duke Energy and ATC may continue to develop transmission projects independently. DATC will own all of the transmission assets it builds and operates. Equity ownership of DATC will be split equally between Duke Energy and ATC.</p>
<p><span class="boldred">Tres Amigas</span> awarded a $200 million contract to <span class="boldred">Alstom Grid</span> to deliver high-voltage direct-current (HVDC) converter and automation technology for the first stage of the Tres Amigas SuperStation project in New Mexico. The project aims to interconnect America’s three primary electricity grids, the Eastern (Southwest Power Pool), Western (Western Electricity Coordinating Council) and Texas (Electric Reliability Council of Texas) networks. Under the contract, Alstom Grid will supply a 750-MW, 345-kV DC converter scheme. Engineering design for the transmission interconnection is underway, with construction scheduled to commence by 2012, and commercial operations expected in 2014.</p>
<h4>Environmental</h4>
<p><span class="boldred">American Electric Power</span> (AEP) installed <span class="boldred">GE</span>’s ABMet wastewater bioreactor system at the utility’s Mountaineer coal-fueled power plant in New Haven, W.Va. The proprietary biological treatment system uses a special molasses-based product as a nutrient for microbes that reduce selenium, a constituent found in many coal-fired power plant water emissions. GE’s ABMet technology utilizes special strains of common, non-pathogenic microbes that facilitate conversion of soluble selenium into elemental selenium, which is removed from the system during periodic backwashing. The microbes, which are fed the molasses-based nutrient, are seeded in a bed of activated carbon that acts as a growth medium for the microbes to create a biofilm. Selenium-laden wastewater passes through this bioreactor and a reduction reaction occurs. Other than the addition of the nutrient, GE says the system will be self-sustaining once it’s established. Selenium is an element found in coal that is not consumed in the combustion process and typically can be found in several of a plant’s post-combustion waste streams. AEP is installing GE’s system to allow its 1,300-MW Mountaineer generating station to comply with a new discharge limit for selenium. Construction of AEP’s treatment facility began in July 2010. The system is scheduled to become operational by the end of 2011.</p>
<p><span class="boldred">TÜV SÜD America</span> announced that the <span class="boldred">Massachusetts Department of Environmental Protection</span> (MassDEP) approved the Massachusetts-based company as a verification body to provide verification services for the Massachusetts Greenhouse Gas (GHG) Reporting Program. The Global Warming Solutions Act (GWSA) required MassDEP to promulgate mandatory GHG reporting regulations.</p>
<h4>Smart Grid</h4>
<p><span class="boldred">ABB</span> won orders from <span class="boldred">CenterPoint Energy</span> for the latest Service Suite mobile workforce management software from Ventyx and for the FocalPoint business intelligence solution from ABB’s latest acquisition, Obvient. These will be integrated into CenterPoint’s advanced distribution automation system, based on ABB’s Network Manager distribution management system (DMS).</p>
<p>The governing board of the public-private <span class="boldred">Smart Grid Interoperability Panel</span> (SGIP) voted in favor of a new smart grid standard and a set of guidelines. The documents address the need for wireless communications among grid-connected devices, as well as the ability to upgrade household electricity meters as the smart grid evolves. The SGIP identified “Guidelines for Assessing Wireless Communications for Smart Grid Applications” and “Meter Upgradeability Standard” as critical needs for realizing a modern power grid.</p>
<h4>Generation</h4>
<p><span class="boldred">Survalent Technology</span> commissioned a new SCADA system for the Golden Spread Electric Cooperative Antelope Station. Antelope Station is a gas-fired power plant with 18 9-MW gensets capable of generating about 170 MW, allowing the plant to quickly respond to regional capacity requirements.The SCADA system includes Survalent’s open system applications.</p>
<p><span class="boldred">Dynamic Solar</span> completed a 250-kW solar system in Philadelphia, Pa., for the Philadelphia Water Department. Dynamic Solar teamed with CETCO Contracting Services and Nucero Electric to design, engineer and install the 250-kW ground mounted system. The array is located at the Southeast Water Pollution Control Plant and is expected to generate approximately 330,000 kWh of solar electricity per year.</p>
<p><span class="boldred">Chevron Mining Inc.</span> recently began operating a 1-MW concentrating solar photovoltaic (CPV) power plant at the tailing site of its molybdenum mine in Questa, N.M. The 20-acre facility includes 172 solar trackers. Kit Carson Electric Cooperative is buying the output under a power purchase agreement.</p>
<p><span class="boldred">Dominion Virginia Power</span> is planning to convert three 63-MW power stations from using coal to biomass. The power stations in Altavista, Hopewell and Southampton County are identical and went into operation in 1992, providing peaking power supplies. When converted, they would generate 50 MW each, but operate as a base-load resource. The facilities will be fueled with logging waste. Pending approvals from the Virginia Department of Environmental Quality and the Virginia State Corporation Commission, the facilities could begin burning biomass in 2013.</p>
<p><span class="boldred">NextEra Energy Resources</span> entered a power purchase agreement with <span class="boldred">Google Energy</span> to purchase 100.8 MW of capacity from NextEra Energy Resources’ Minco II Wind Energy Center, currently under development in Grady and Caddo counties in Oklahoma. The project is comprised of 63 GE 1.6-MW wind turbines and is expected to be operational by the end of 2011. This is the second power purchase agreement for wind energy between the two companies. Google Energy also purchases 114 MW from NextEra Energy Resources’ Story II Wind Energy Center located in Story and Hardin counties in Iowa.</p>
<p><span class="boldred">Fotowatio Renewable Ventures</span> (FRV) closed financing and began construction on the 30-MW Webberville solar project, one of the largest solar PV systems in the United States. The project, located near Austin, Texas, is scheduled to be operational by year-end. <span class="boldred">Renewable Energy Systems Americas</span> (RES Americas) was selected to construct the project and provide operations and maintenance services for five years. Austin Energy will buy the plant’s output under a 25-year power purchase agreement. FRV partnered with Bayerische Landesbank (BayernLB), which underwrote the project construction debt. The project will use crystalline 270-Watt photovoltaic modules from Trina Solar.</p>
<p><span class="boldred">The Solar Electric Power Association</span> (SEPA) announced five utility groups have joined SEPA: American Municipal Power (AMP); City of Lake Worth, Fla.; Central Hudson Gas &amp; Electric (CH Energy Group); Greenwood Utilities Commission; South Mississippi Electric Power Association. SEPA says its utility membership now represents more than 95 percent of the nation’s installed solar capacity and 47 percent of all U.S. electric customers.</p>
<p><span class="boldred">Solar Power Partners</span> (SPP) and <span class="boldred">JCM Capital</span> have signed an agreement with <span class="boldred">Solar Power Network</span> (SPN), to provide full project financing for up to 20 MW of commercial-scale rooftop installations to be located throughout southwestern Ontario. The agreement follows the recent Solar Power Partners and JCM Capital announcement on the launch of their fund to develop, finance, own, and operate 200 MW of solar projects in Ontario. The SPN contract brings the current fund volume to 50 MW. SPP and JCM have already initiated 20 MW of projects that will start construction in 2011. The fund focuses on the installation of solar projects on large commercial and industrial buildings across Ontario, using the province’s feed-in-tariff program via solar PPAs with the Ontario Power Authority.</p>
<p><span class="boldred">Boeing</span> and <span class="boldred">South Carolina Electric &amp; Gas</span> (SCE&amp;G) created an energy partnership that will enable Boeing South Carolina to operate as a 100 percent renewable energy site. Renewable energy will be generated at the North Charleston site in part with thin-film solar laminate panels owned, installed and maintained by SCE&amp;G on the new Boeing 787 Final Assembly building roof. Under the arrangement, SCE&amp;G will install the solar generation system and dedicate the power from the system to the Boeing site. SCE&amp;G will then supplement the solar generated energy with power from its system resources, coupled with renewable energy certificates from its renewable generating facility, to meet all of Boeing’s energy requirements.</p>
<p><span class="boldred">Constellation Energy</span> and <span class="boldred">Holyoke Gas &amp; Electric Department (HG&amp;E)</span> are developing a new 4.5-MW solar installation that will generate electricity for Holyoke. Constellation Energy will build, own and maintain the system, and HG&amp;E will purchase the output under a 20-year PPA at a fixed cost that Constellation says is less than projected market rates. HG&amp;E’s solar power system will include 18,400 SolarWorld photovoltaic ground-mounted panels at two locations. The system is scheduled for commercial operation in summer 2011.</p>
<p><span class="boldred">Hartz Solar Hamilton</span>, a wholly-owned subsidiary of Hartz Mountain Industries, selected <span class="boldred">RMT Inc.</span> to design and construct its Hamilton solar project. The facility, nominally rated at 7.5 MW AC, is located in Hamilton Township, Mercer County, N.J. RMT says it will begin construction in June, with commissioning in November. RMT is responsible for engineering, procurement, and construction (EPC) of the foundations and racking systems, the PV modules, the DC and AC collector systems, the SCADA system, and testing and commissioning. The project will involve installation of more than 30,000 Suntech 280-Watt crystalline PV modules.</p>
<p><span class="boldred">The California Public Utilities Commission</span> (CPUC) approved <span class="boldred">Pacific Gas &amp; Electric</span>’s 20-year contract to purchase 150 MW of solar power from <span class="boldred">Sempra Generation</span>’s Mesquite Solar 1 PV power facility in Arizona. Mesquite Solar 1 is the first phase of Sempra Generation’s planned 700-MW Mesquite Solar complex located 40 miles west of Phoenix. With approval of the contract secured, the company plans to begin construction in June.</p>
<p><span class="boldred">San Diego Gas &amp; Electric (SDG&amp;E)</span> and subsidiaries of <span class="boldred">Soitec Solar Development</span> signed three contracts with a combined capacity of 30 MW of solar energy. The electricity will be generated at three solar power plant sites in San Diego County that will use Soitec CPV modules to be manufactured in a new factory being built in the San Diego area. The contracts require approval from the California Public Utilities Commission.</p>
<p><span class="boldred">San Diego Gas &amp; Electric (SDG&amp;E)</span> entered a 20-year contract for up to 156 MW of power supplied from the first phase of Sempra Generation’s Energía Sierra Juárez wind project in Baja California, Mexico. Both SDG&amp;E and Sempra Generation are subsidiaries of Sempra Energy. SDG&amp;E selected Energía Sierra Juárez as part of the utility’s 2009 competitive solicitation for renewable resources. The project was compared to other competitive bids, and the process was overseen by an independent evaluator, as required by the California Public Utilities Commission (CPUC). The contract is subject to approval by the CPUC and Federal Energy Regulatory Commission. Construction on Energía Sierra Juárez 1, about 70 miles east of San Diego and just south of the U.S.-Mexico border, is expected to begin in 2012.</p>
<p><span class="boldred">Ocean Power Technologies</span> (OPT) awarded four contracts to Oregon companies in connection with the manufacturing of its PB150 PowerBuoy wave energy generating device. The four companies receiving contracts are: American Bridge Manufacturing, Oregon Iron Works, Cascade General (a subsidiary of Vigor Industrial), and Sause Bros. Inc. After the initial PowerBuoy is deployed and tested off the coast of Reedsport, expected later this year, OPT plans to construct the first commercial-scale wave power station in the United States, consisting of up to nine additional PowerBuoys and grid connection infrastructure, subject to receipt of all necessary regulatory approvals and additional funding.</p>
<p><span class="boldred">Areva Solar</span> was awarded a major contract to install a 44-MW solar thermal augmentation project at a 750-MW coal-fired power station in Queensland, Australia. Areva says the project is the largest solar project in the Southern Hemisphere and the world’s largest solar power augmentation project at a coal-fired facility. Areva Solar will use its Australian-pioneered compact linear Fresnel reflector (CLFR) technology at CS Energy’s Kogan Creek Power Station. Construction is scheduled to begin in the first half of 2011, with commercial operation planned for 2013.</p>
<p><span class="boldred">Sempra Generation</span> entered a 20-year contract to sell 21 MW of wind energy to <span class="boldred">Maui Electric Company</span> from the Auwahi Wind project on the Ulupalakua Ranch in the southeastern region of Maui. The project is currently undergoing environmental review by Maui County, and state and federal agencies. Construction is expected to begin in early 2012.</p>
<h4>DR and Customer Systems</h4>
<p><span class="boldred">Baltimore Gas and Electric</span> (BGE) selected Opower’s Advanced Customer Engagement (ACE) platform as the front-end solution for its upcoming smart meter rollout. Opower’s ACE platform takes individual and neighborhood energy-usage data and transforms it into personalized reports that help customers understand their own energy usage more clearly. The reports also offer advice on ways to reduce energy use, helping customers lower their gas and electricity bills.</p>
<p><span class="boldred">Con Edison</span> added Apogee’s online tools to its website, <a href="http://www.conEd.com">www.conEd.com</a>, as part of its “The Power of Green” campaign, to help customers evaluate their energy use and find ways to save on their energy costs. The Energy Toolkit provides answers to energy questions; the HomeEnergyCalculator analyzes the customer’s energy use and makes recommendations for savings; and specialized calculators allow customers to run what-if scenarios on the use of lighting, appliances, TVs, and thermostat settings.</p>
<p><span class="boldred">GreenHouse Holdings</span> announced a partnership with <span class="boldred">EnergyConnect</span>. Together, the companies will offer customers integrated energy management and automated demand response (auto-DR) services. Under the terms of the agreement, GreenHouse will offer its auto-DR services to EnergyConnect’s customers, and EnergyConnect will market its products to Greenhouse’s customer base.</p>
<p><span class="boldred">SavWatt USA</span> subsidiary <span class="boldred">Pro EcoSolutions</span> entered a non-exclusive agreement with <span class="boldred">Comverge</span> and <span class="boldred">Con Edison</span> to implement their targeted demand side management program, which offers incentives for upgrading to more energy efficient equipment. Pro EcoSolutions will work with New York City businesses to replace existing incandescent bulbs, subsidize the cost of lighting, and administer the installation. Con Edison will be paying Pro EcoSolutions 65 cents per Watt saved.</p>
<h4>Metering</h4>
<p><span class="boldred">Kansas City Board of Public Utilites</span> (KCBPU) selected <span class="boldred">Elster</span> for the utility’s smart grid deployment. KCBPU will implement Elster’s EnergyAxis to streamline business and operational processes. The municipal utility plans to deploy more than 69,000 of Elster’s smart electric meters and 55,000 Elster smart water meters over the next few years.</p>
<p><span class="boldred">Comision Federal de Electricidad</span> (CFE) selected <span class="boldred">Elster</span>’s EnergyAxis smart grid solution to power the utility’s first advanced metering infrastructure (AMI) project in Mexico City. The Mexican Secretaria de Energia (SENER) and CFE will use the EnergyAxis pilot as a benchmark for evaluating Elster’s technologies for potential future deployments. CFE has already deployed nine other EnergyAxis systems throughout 14 of Mexico’s 16 service areas.</p>
<p><span class="boldred">BC Hydro</span> awarded a $270 million contract to <span class="boldred">Itron</span> to supply smart metering and meter data management systems. Itron will provide its OpenWay smart meters, run over a multi-application communication network powered by Cisco.</p>
<h4>EVs and Storage</h4>
<p><span class="boldred">Duke Energy</span> plans to store electricity generated at its Notrees Windpower project in west Texas using an energy storage and power management system developed by Austin-based <span class="boldred">Xtreme Power</span>. Duke Energy will work with the Energy Reliability Council of Texas (ERCOT) to integrate the wind power and battery storage system into the state’s independent power grid. The Electric Power Research Institute (EPRI) will advise the project team, collect data and help assess the potential for broader adoption of energy storage solutions throughout the industry. Duke Energy is targeting an in-service date for the battery storage system by late 2012.</p>
<p><span class="boldred">Siemens Energy</span> was commissioned to install five multi-level electric vehicle (EV) charging stations to support Loudoun County, Va.’s new commuter park-and-ride lot in Scott Jenkins Memorial Park. Siemens multi-level charging stations are designed for public outdoor applications. The stations deliver Level II charging and Level I charging through two separate outputs, which can deliver energy simultaneously. Siemens’ EV charging stations will be equipped with connectivity via the ChargePoint Network, which allows access to all manufacturers of vehicle charging stations, provides station monitoring and driver support, and mobile apps for station status and charging notifications. The stations were scheduled to be installed at the Loudoun County park in May 2011.</p>
<p>The <span class="boldred">EA Technology Group</span> collaborated with <span class="boldred">Energetix Pnu Power</span> to market compressed air batteries worldwide. Headquartered close to Energetix Pnu Power in Capenhurst, U.K., EA Technology will use its network of offices in the United States, China, Middle East and Australia, together with 35 distribution partners, to develop sales of Pnu Power products in a range of power backup and uninterruptible power supply applications. These include utility switching, industrial processes and data centers.</p>
<p><span class="boldred">Newmark Energy Solutions</span> (NES) formed strategic relationships with <span class="boldred">UTC Power Corp.</span> (UTC), <span class="boldred">Newmark Knight Frank</span>, and <span class="boldred">Austin Energy Partners Solutions</span> (AEP) to market, deliver, maintain and warranty fuel cells to commercial real estate markets across the United States. NES distributes UTC Power stationary fuel-cell units in the United States, and plans to permit, design, finance, construct, and operate a fleet of UTC fuel cells, installing 20 MW of capacity each year. Under the strategic relationship with Newmark Energy Solutions, UTC will provide fuel-cell product and support, while Newmark brings commercial real estate resources and expertise. AEP is expected to provide risk management expertise.</p>
<h4>People</h4>
<p><span class="boldred">SightLogix</span> appointed <span class="boldred">Jack Tomarchio</span> to its board of directors. Tomarchio is a former deputy secretary for intelligence and analysis operations under Pres. George W. Bush. Before that Tomarchio practiced law with an expertise in national security issues. He recently retired as a colonel from the United States Army Reserve where his last assignment was with the United States Special Operations Command.</p>
<p><span class="boldred">Ross Malme</span> joined <span class="boldred">Skipping Stone</span> as a partner and member of the board of directors as an equity owner. Malme previously held executive-level roles with Schneider Electric’s demand response resource center, Enron Energy Services, Schlumberger and Chevron. Ross was also the founder and CEO of RETX, a demand response technology firm, which has since been acquired by Schneider Electric. He served as chairman of Peak Load Management Alliance (PLMA) and formed a global demand response initiative in conjunction with the International Energy Agency (IEA).</p>
<h4>M&amp;A</h4>
<p><span class="boldred">Google</span> and subsidiaries of <span class="boldred">ITOCHU</span> and <span class="boldred">Sumitomo</span> joined <span class="boldred">GE Energy Financial Services</span> and developer and managing member <span class="boldred">Caithness Energy</span> as owners of the 845-MW Shepherds Flat wind project under construction near Arlington, Ore. The three new participants are investing approximately $500 million in the $2 billion project. The Shepherds Flat wind project stretches across 30 square miles of Gilliam and Morrow Counties in north-central Oregon.</p>
<p><span class="boldred">Lincoln Renewable Energy</span><span class="boldred">(LRE) </span>closed a $41 million power sale and project finance deal with Macquarie Energy. As part of the deal, Macquarie will enter a long-term purchase agreement for power and renewable energy credits from LRE’s New Jersey Oak solar project, and Macquarie will provide construction financing and term debt. LRE will be the long-term owner of the facility. Quanta Services is building the plant and providing O&amp;M services under an EPC contract. The New Jersey Oak solar project is a 10-MW PV project to be constructed in Fairfield Township, Cumberland County. The project will consist of some 55,000 solar panels constructed on a 100-acre site and will connect to Atlantic City Electric’s distribution system when it’s completed late in 2011.</p>
<p><span class="boldred">Ioxus Inc</span>. received $21 million from Energy Technology Ventures, a GE-NRG Energy-ConocoPhillips joint venture; Northwater Capital through its Northwater Intellectual Property Fund; Aster Capital (representing Alstom, Schneider Electric and Rhodia); and return investor Braemar Energy Ventures. Ioxus will use this funding to develop its technology and expand sales, marketing and manufacturing to meet growing demand for ultracapacitors.</p>
<p><span class="boldred">Calico Energy Services</span> received financial backing from Point B Capital and engaged the services of Point B, a management consulting firm that specializes in strategic execution. The investment provides capital to accelerate the company’s growth, and will allow Calico to use Point B’s leadership and management consulting services.</p>
<p><span class="boldred">Nexamp</span> acquired <span class="boldred">SolVera Energy</span> as part of an initiative to grow its utility-scale and distributed renewable energy business. The company also formed into two new business units, Renewable Energy Solutions and Clean Energy Advisory Services, which is focused on energy efficiency consulting services for commercial and industrial customers.</p>
<p><span class="boldred">Pattern Energy</span> partnered with <span class="boldred">Samsung Renewable Energy</span> to acquire wind power projects in Ontario from Acciona and Boralex. These projects will be combined with Pattern and Samsung’s larger South Kent Wind Farm, which is under development. The 270 MW wind farm is located in the Regional Municipality of Chatham-Kent. Samsung and its partners have an agreement with the Province of Ontario to provide 2,500 MW of new renewable energy. The first phase involves 400 MW of wind power and 100 MW of solar power. The companies secured dedicated transmission capacity for these initial projects. Pattern and Samsung agreed to develop more than 500 MW of wind power using Ontario-made wind turbine components from the new factories in Tillsonburg and in Windsor.</p>
<p><span class="boldred">Pattern and Samsung</span> recently announced the acquisition of land from the Fargo Wind Project from <span class="boldred">Suncor Energy</span> and a nearby wind project development from <span class="boldred">Northland Power</span>.</p>
<p><span class="boldred">DeWind Co</span>, a wholly owned subsidiary of <span class="boldred">Daewoo Shipbuilding and Marine Engineering</span>, acquired the rights for the 20-MW Frisco wind project, located in the northern-most portion of Hansford County, Texas, from local developer Distributed Wind Systems. DeWind will install 10 of its 2-MW D8.2 wind turbines at the Frisco site, which is scheduled to be in commercial operation by the end of 2011. The D8.2 turbines will be furnished from DeWind assembly contractor TECO-Westinghouse located in Round Rock, Texas.</p>
<p><span class="boldred">PPL</span> completed its acquisition of the <span class="boldred">Central Networks</span> electricity distribution business, the second-largest such business in the United Kingdom. PPL, through a U.K. subsidiary, acquired Central Networks from E.ON UK plc for $5.7 billion in cash, inclusive of certain permitted pre-closing adjustments, and $800 million of existing public debt to be assumed through consolidation. To complete closing, PPL used acquisition financing under a syndicated bridge facility arranged by Bank of America Merrill Lynch and Credit Suisse. The permanent financing plan includes a combination of common stock, equity units and debt. PPL expects to complete the permanent equity financing in the second quarter of 2011 and the debt financing by the end of the year.</p>
<p>The boards of directors of <span class="boldred">Exelon</span> and <span class="boldred">Constellation Energy</span> agreed to combine the two companies in a stock-for-stock transaction. Under the terms of the transaction, Constellation investors would receive the equivalent of $38.59 a share, about an 18-percent premium. The combined entity would have a market value of roughly $34 billion. The resulting company would retain the Exelon name and be headquartered in Chicago. Exelon’s power marketing business (Power Team) and Constellation’s retail and wholesale business would be consolidated under the Constellation brand and be headquartered in Baltimore. Both companies’ renewable energy businesses also would be headquartered in Baltimore, and the three utilities within the new Exelon—BGE, ComEd and PECO—would remain standalone organizations.</p>
<p> </p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/generation-markets">Generation &amp; Markets</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/td-grid">T&amp;D Grid</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/finance">Finance</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/vendor-neutral">Vendor Neutral</a></li></ul></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
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<a href="/tags/abb">ABB</a><span class="pur_comma">, </span><a href="/tags/abmet">ABMet</a><span class="pur_comma">, </span><a href="/tags/acciona">Acciona</a><span class="pur_comma">, </span><a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/alstom">Alstom</a><span class="pur_comma">, </span><a href="/tags/alstom-grid">Alstom Grid</a><span class="pur_comma">, </span><a href="/tags/american-electric-power">American Electric Power</a><span class="pur_comma">, </span><a href="/tags/american-municipal-power">American Municipal Power</a><span class="pur_comma">, </span><a href="/tags/american-transmission">American Transmission</a><span class="pur_comma">, </span><a href="/tags/american-transmission-co">American Transmission Co.</a><span class="pur_comma">, </span><a href="/tags/ami">AMI</a><span class="pur_comma">, </span><a href="/tags/amp">AMP</a><span class="pur_comma">, </span><a href="/tags/apogee">Apogee</a><span class="pur_comma">, </span><a href="/tags/areva">Areva</a><span class="pur_comma">, </span><a href="/tags/atc">ATC</a><span class="pur_comma">, </span><a href="/tags/austin-energy">Austin Energy</a><span class="pur_comma">, </span><a href="/tags/austin-energy-partners-solutions">Austin Energy Partners Solutions</a><span class="pur_comma">, </span><a href="/tags/baltimore-gas-and-electric">Baltimore Gas and Electric</a><span class="pur_comma">, </span><a href="/tags/bank-america">Bank of America</a><span class="pur_comma">, </span><a href="/tags/bank-america-merrill-lynch">Bank of America Merrill Lynch</a><span class="pur_comma">, </span><a href="/tags/bayerische-landesbank">Bayerische Landesbank</a><span class="pur_comma">, </span><a href="/tags/bayernlb">BayernLB</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/bc-hydro">BC Hydro</a><span class="pur_comma">, </span><a href="/tags/bge">BGE</a><span class="pur_comma">, </span><a href="/tags/boeing">Boeing</a><span class="pur_comma">, </span><a href="/tags/caithness">Caithness</a><span class="pur_comma">, </span><a href="/tags/caithness-energy">Caithness Energy</a><span class="pur_comma">, </span><a href="/tags/calico-energy-services">Calico Energy Services</a><span class="pur_comma">, </span><a href="/tags/california-public-utilities-commission">California Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/centerpoint-energy-0">CenterPoint Energy</a><span class="pur_comma">, </span><a href="/tags/central-networks">Central Networks</a><span class="pur_comma">, </span><a href="/tags/cfe">CFE</a><span class="pur_comma">, </span><a href="/tags/ch-energy-group">CH Energy Group</a><span class="pur_comma">, </span><a href="/tags/chargepoint">ChargePoint</a><span class="pur_comma">, </span><a href="/tags/chevron">Chevron</a><span class="pur_comma">, </span><a href="/tags/china">China</a><span class="pur_comma">, </span><a href="/tags/cisco">Cisco</a><span class="pur_comma">, </span><a href="/tags/city-lake-worth">City of Lake Worth</a><span class="pur_comma">, </span><a href="/tags/comed">ComEd</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/communication">Communication</a><span class="pur_comma">, </span><a href="/tags/comverge">Comverge</a><span class="pur_comma">, </span><a href="/tags/con-edison">Con Edison</a><span class="pur_comma">, </span><a href="/tags/constellat">Constellat</a><span class="pur_comma">, </span><a href="/tags/constellation">Constellation</a><span class="pur_comma">, </span><a href="/tags/constellation-energy">Constellation Energy</a><span class="pur_comma">, </span><a href="/tags/cpuc">CPUC</a><span class="pur_comma">, </span><a href="/tags/cpv">CPV</a><span class="pur_comma">, </span><a href="/tags/credit-suisse">Credit Suisse</a><span class="pur_comma">, </span><a href="/tags/daewoo">Daewoo</a><span class="pur_comma">, </span><a href="/tags/daewoo-shipbuilding-and-marine-engineering">Daewoo Shipbuilding and Marine Engineering</a><span class="pur_comma">, </span><a href="/tags/datc">DATC</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/dewind">DeWind</a><span class="pur_comma">, </span><a href="/tags/dg">DG</a><span class="pur_comma">, </span><a href="/tags/distributed-wind-systems">Distributed Wind Systems</a><span class="pur_comma">, </span><a href="/tags/dms">DMS</a><span class="pur_comma">, </span><a href="/tags/dominion">Dominion</a><span class="pur_comma">, </span><a href="/tags/dominion-virginia-power">Dominion Virginia Power</a><span class="pur_comma">, </span><a href="/tags/dr">DR</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/duke-american-transmission-co">Duke-American Transmission Co</a><span class="pur_comma">, </span><a href="/tags/ea-technology-group">EA Technology Group</a><span class="pur_comma">, </span><a href="/tags/electric-power-research">Electric Power Research</a><span class="pur_comma">, </span><a href="/tags/electric-power-research-institute">Electric Power Research Institute</a><span class="pur_comma">, </span><a href="/tags/electric-power-research-institute-epri">Electric Power Research Institute (EPRI)</a><span class="pur_comma">, </span><a href="/tags/electric-reliability-council-texas">Electric Reliability Council of Texas</a><span class="pur_comma">, </span><a href="/tags/elster">Elster</a><span class="pur_comma">, </span><a href="/tags/energetix-pnu-power">Energetix Pnu Power</a><span class="pur_comma">, </span><a href="/tags/energyaxis-0">EnergyAxis</a><span class="pur_comma">, </span><a href="/tags/epa">EPA</a><span class="pur_comma">, </span><a href="/tags/epc">EPC</a><span class="pur_comma">, </span><a href="/tags/epri">EPRI</a><span class="pur_comma">, </span><a href="/tags/ercot">ERCOT</a><span class="pur_comma">, </span><a href="/tags/etc">ETC</a><span class="pur_comma">, </span><a href="/tags/ev">EV</a><span class="pur_comma">, </span><a href="/tags/evs">EVs</a><span class="pur_comma">, </span><a href="/tags/exelon">Exelon</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission">Federal Energy Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/fotowatio-renewable-ventures">Fotowatio Renewable Ventures</a><span class="pur_comma">, </span><a href="/tags/frisco">Frisco</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/ge-energy-financial">GE Energy Financial</a><span class="pur_comma">, </span><a href="/tags/ge-energy-financial-services">GE Energy Financial Services</a><span class="pur_comma">, </span><a href="/tags/george-w-bush">George W. Bush</a><span class="pur_comma">, </span><a href="/tags/ghg">GHG</a><span class="pur_comma">, </span><a href="/tags/gis">GIS</a><span class="pur_comma">, </span><a href="/tags/global-warming-solutions-act">Global Warming Solutions Act</a><span class="pur_comma">, </span><a href="/tags/google">Google</a><span class="pur_comma">, </span><a href="/tags/google-energy">Google Energy</a><span class="pur_comma">, </span><a href="/tags/greenhouse-holdings">GreenHouse Holdings</a><span class="pur_comma">, </span><a href="/tags/greenwood-utilities-commission">Greenwood Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/gwsa">GWSA</a><span class="pur_comma">, </span><a href="/tags/hartz-solar-hamilton">Hartz Solar Hamilton</a><span class="pur_comma">, </span><a href="/tags/hvdc">HVDC</a><span class="pur_comma">, </span><a href="/tags/hydro">Hydro</a><span class="pur_comma">, </span><a href="/tags/iea">IEA</a><span class="pur_comma">, </span><a href="/tags/international-energy-agency">International Energy Agency</a><span class="pur_comma">, </span><a href="/tags/interoperability">Interoperability</a><span class="pur_comma">, </span><a href="/tags/ioxus-inc">Ioxus Inc</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/itochu">ITOCHU</a><span class="pur_comma">, </span><a href="/tags/itron">Itron</a><span class="pur_comma">, </span><a href="/tags/jack-tomarchio">Jack Tomarchio</a><span class="pur_comma">, </span><a href="/tags/jcm-capital">JCM Capital</a><span class="pur_comma">, </span><a href="/tags/lincoln-renewable-energy">Lincoln Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/macquarie-energy">Macquarie Energy</a><span class="pur_comma">, </span><a href="/tags/massachusetts-department-environmental-protection">Massachusetts Department of Environmental Protection</a><span class="pur_comma">, </span><a href="/tags/massachusetts-greenhouse-gas">Massachusetts Greenhouse Gas</a><span class="pur_comma">, </span><a href="/tags/massdep">MassDEP</a><span class="pur_comma">, </span><a href="/tags/maui-electric-co">Maui Electric Co</a><span class="pur_comma">, </span><a href="/tags/maui-electric-company">Maui Electric Company</a><span class="pur_comma">, </span><a href="/tags/merrill-lynch">Merrill Lynch</a><span class="pur_comma">, </span><a href="/tags/mesquite">Mesquite</a><span class="pur_comma">, </span><a href="/tags/mesquite-solar-1">Mesquite Solar 1</a><span class="pur_comma">, </span><a href="/tags/miso">MISO</a><span class="pur_comma">, </span><a href="/tags/mountaineer">Mountaineer</a><span class="pur_comma">, </span><a href="/tags/network">Network</a><span class="pur_comma">, </span><a href="/tags/new-haven">New Haven</a><span class="pur_comma">, </span><a href="/tags/new-jersey">New Jersey</a><span class="pur_comma">, </span><a href="/tags/newmark-knight-frank">Newmark Knight Frank</a><span class="pur_comma">, </span><a href="/tags/nexamp">Nexamp</a><span class="pur_comma">, </span><a href="/tags/nextera">NextEra</a><span class="pur_comma">, </span><a href="/tags/nextera-energy">NextEra Energy</a><span class="pur_comma">, </span><a href="/tags/nextera-energy-resources">NextEra Energy Resources</a><span class="pur_comma">, </span><a href="/tags/notrees-windpower">Notrees Windpower</a><span class="pur_comma">, </span><a href="/tags/nrg">NRG</a><span class="pur_comma">, </span><a href="/tags/nrg-energy">NRG Energy</a><span class="pur_comma">, </span><a href="/tags/ocean-power-technologies">Ocean Power Technologies</a><span class="pur_comma">, </span><a href="/tags/openway">OpenWay</a><span class="pur_comma">, </span><a href="/tags/opower">Opower</a><span class="pur_comma">, </span><a href="/tags/opt">OPT</a><span class="pur_comma">, </span><a href="/tags/ot">OT</a><span class="pur_comma">, </span><a href="/tags/pattern-energy">Pattern Energy</a><span class="pur_comma">, </span><a href="/tags/peco">PECO</a><span class="pur_comma">, </span><a href="/tags/pjm">PJM</a><span class="pur_comma">, </span><a href="/tags/pollution">Pollution</a><span class="pur_comma">, </span><a href="/tags/ppa">PPA</a><span class="pur_comma">, </span><a href="/tags/ppl">PPL</a><span class="pur_comma">, </span><a href="/tags/pv">PV</a><span class="pur_comma">, </span><a href="/tags/pv-systems">PV systems</a><span class="pur_comma">, </span><a href="/tags/quanta-services">Quanta Services</a><span class="pur_comma">, </span><a href="/tags/reliability">Reliability</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/renewable-energy">Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/renewable-energy-systems-americas">Renewable Energy Systems Americas</a><span class="pur_comma">, </span><a href="/tags/res">RES</a><span class="pur_comma">, </span><a href="/tags/res-americas">RES Americas</a><span class="pur_comma">, </span><a href="/tags/rmt-inc">RMT Inc.</a><span class="pur_comma">, </span><a href="/tags/ross-malme">Ross Malme</a><span class="pur_comma">, </span><a href="/tags/samsung-renewable-energy">Samsung Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/san-diego-county">San Diego County</a><span class="pur_comma">, </span><a href="/tags/savwatt-usa">SavWatt USA</a><span class="pur_comma">, </span><a href="/tags/scada">SCADA</a><span class="pur_comma">, </span><a href="/tags/sce">SCE</a><span class="pur_comma">, </span><a href="/tags/schneider">Schneider</a><span class="pur_comma">, </span><a href="/tags/sempra">Sempra</a><span class="pur_comma">, </span><a href="/tags/sempra-energy">Sempra Energy</a><span class="pur_comma">, </span><a href="/tags/sempra-generation">Sempra Generation</a><span class="pur_comma">, </span><a href="/tags/sep">SEP</a><span class="pur_comma">, </span><a href="/tags/sepa">SEPA</a><span class="pur_comma">, </span><a href="/tags/sgip">SGIP</a><span class="pur_comma">, </span><a href="/tags/shepherds-flat">Shepherds Flat</a><span class="pur_comma">, </span><a href="/tags/siemens">Siemens</a><span class="pur_comma">, </span><a href="/tags/siemens-energy">Siemens Energy</a><span class="pur_comma">, </span><a href="/tags/sightlogix">SightLogix</a><span class="pur_comma">, </span><a href="/tags/skipping-stone">Skipping Stone</a><span class="pur_comma">, </span><a href="/tags/smart-grid-interoperability-panel">Smart Grid Interoperability Panel</a><span class="pur_comma">, </span><a href="/tags/soitec-solar-development">Soitec Solar Development</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/solar-electric-power-association">Solar Electric Power Association</a><span class="pur_comma">, </span><a href="/tags/solar-panels">solar panels</a><span class="pur_comma">, </span><a href="/tags/solar-power-partners">Solar Power Partners</a><span class="pur_comma">, </span><a href="/tags/south-mississippi-electric-power">South Mississippi Electric Power</a><span class="pur_comma">, </span><a href="/tags/southwest-power-pool">Southwest Power Pool</a><span class="pur_comma">, </span><a href="/tags/spp">SPP</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/sumitomo">Sumitomo</a><span class="pur_comma">, </span><a href="/tags/survalent-technology">Survalent Technology</a><span class="pur_comma">, </span><a href="/tags/technology">Technology</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/tres-amigas">Tres Amigas</a><span class="pur_comma">, </span><a href="/tags/trina-solar">Trina Solar</a><span class="pur_comma">, </span><a href="/tags/utc-power">UTC Power</a><span class="pur_comma">, </span><a href="/tags/utc-power-corp">UTC Power Corp</a><span class="pur_comma">, </span><a href="/tags/webberville">Webberville</a><span class="pur_comma">, </span><a href="/tags/western-electricity-coordinating-council">Western Electricity Coordinating Council</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a><span class="pur_comma">, </span><a href="/tags/xtreme-power">Xtreme Power</a> </div>
</div>
Wed, 01 Jun 2011 04:00:00 +0000puradmin14100 at http://www.fortnightly.comKilling the Electric Car ... Again!http://spark.fortnightly.com/fortnightly/killing-electric-car-again
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<p><strong>The recent rise in oil prices once again stokes the interest in electric vehicles (EV)</strong> – and for good reason. They run cheaper, cleaner and on domestic fuel. Some EVs already have a lower total cost of ownership than a gasoline-powered vehicle, and others will follow as production scales up and unit pricing drops. Unfortunately, in the current regulatory environment, EV adoption in the U.S. will not happen in scale because, in most states, utilities have no meaningful financial incentive to sell electricity to EV owners, yet they bear all the risk of any local system overload from newly increased demand.</p>
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<h3>With all the risk and no reward for utility companies, economic incentives don't support innovation.</h3>
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<p>Reading newspaper headlines about auto company needs and government announced investments, it’s easy to think that technology and infrastructure are the constraints. Clear thinking and an analysis of the situation on the ground shows that the U.S. isn’t technology constrained or capital constrained, but collaboration constrained. A review of the numbers shows that with tremendous profit potential, something must be keeping U.S. businesses down – and out of the good fight.</p>
<p>Though the U.S. has sufficient reserve electricity capacity, it has almost no electricity market for transportation. The market for petroleum-based fuel used for U.S. transportation is about $540 billion when gasoline is just under $3 per gallon. Close to two thirds of that, or $350 billion worth of fuel, is imported. The U.S. electricity market is also $350 billion – about thirds the transportation fuel market in size – and electricity demand grows slowly, at less than the pace of GDP. If you’re a CEO selling a slow-growth commodity, and you see a market 50 percent bigger than your current market – and with faster growth with uptake from current customers – you’d probably look for a way to enter that market.</p>
<p>At daytime, in a slightly high-priced region such as New York state, rates are 11 cents per kilowatt hour (kWh). A Nissan Leaf only consumes 0.24 kWh per mile (according to the FTC and Nissan), which means that an EV owner in New York is paying about 2.5 cents per mile. By comparison, the owner of a 25-mpg car pays 12 cents per mile, with gas priced at $3 per gallon. Put another way, the Leaf consumes 66 cents per gallon equivalent of electric energy, instead of burning $3 worth of gasoline. In New York City where electric customers pay 22 cents/kWh – close to the highest in the nation – the Leaf would run at $1.32 per gallon equivalent. This is a staggering savings in fuel costs, which makes electricity look like an excellent replacement for gasoline.</p>
<p>Now imagine that utility CEO looking at a market 50 percent larger, where customers could save massively by switching to the utility’s fuel.</p>
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<h3>If the utility suddenly starts making more profits by selling electricity overnight for EVs, regulators will force the utility to return to ratepayers any excess income.</h3>
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<p>It gets better. While wholesale gasoline prices fluctuate only a few percent per month, there are substantial fluctuations in electricity price within a 24-hour period, because the U.S. builds electric generation capacity for a small peak period during the year – totaling roughly 80 hours – and demand is consistently low at night. During downtime the country has significant unused capacity, and wholesale prices for electricity can drop by 80 percent every night. If a utility that sells electricity by day at 11 cents/kWh could sell it at night to EV drivers for the same rate by using time-of-day pricing, the utility would be selling a highly cost-competitive fuel source at a massive gross profit.</p>
<p>As a utility executive, if EV adoption would help you sell an environmentally friendlier replacement to gasoline at $1.32 per gallon into a market 50 percent larger than your current market, all while making outsized profit margins, you’d be parked on the doorstep of every major auto company championing for EVs. The auto companies would have multi-year waiting lists for EVs, thanks to orders from electric utilities. Yet this isn’t happening, because for most utility executives, their companies could keep almost none of the windfall profits. Yet, utilities would bear all the risk of potential outages from EVs drawing outsized loads. With all the risk and no reward for utility companies, the economic incentives in the current utility business model don’t support innovation.</p>
<p>The U.S. utility regulatory structure is more outdated than the grid. The regulatory structure, different in every state, was set up to ensure that regulated monopolies weren’t able to charge prices in excess of what a competitive market would have established. Most utilities in the U.S. are regulated to have a fixed rate of return on capital investments, so their real incentive is to deploy capital, not sell electricity. Utilities make the case for new capital deployment and rate increases to regulators – arbitrators and protectors of the consumer – and rates are set so costs are allocated to rate payers. If utilities need more money to invest in the grid or in generation, they make the case, regulators approve, and rates go up. If fuel prices go up, rates go up. Inversely, if the utility suddenly starts making more profits from existing infrastructure – for instance by selling electricity over night for EVs – regulators will force the utility to return to ratepayers any excess income. This has some validity, as the ratepayers funded all of the infrastructure to support a sudden new market opportunity.</p>
<p>In our analysis, a New York utility could see $80 million per year in gross profits if just 10 percent of customers in one of its districts switched to EVs, and if the utility could sell electricity for overnight charging at daytime rates. This would be a significant cash flow with which to attract private capital for infrastructure, while subsidizing the EV market to jump start it beyond early adopters.</p>
<p>If the idea of subsidizing a car for a long-term fuel contract sounds foreign, think about your cell phone and cable box; both are heavily subsidized for the long-term contract. Would you consider buying an EV if it came with a 5-year guarantee of $1.32 per gallon equivalent of electricity?</p>
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<h3>If EVs win 1 percent of the market share for ground transportation, it will eliminate more than $5 billion from the U.S. trade deficit.</h3>
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<p>Making markets may not sound as headline-sexy as investing in new technology, yet it’s tremendously valuable from many perspectives – federal, local, corporate shareholder, and consumer. Making a market harnesses the power of entrepreneurs and capitalists to get the job done – and they raise the necessary financing. Utility CEOs should see EVs as a way to grow their electricity sales beyond the rate of GDP. With time-of-day pricing, EV charging allows utilities to expand cash flows and maximize existing capacity, therefore increasing both net income and valuation multiples – all while greening their communities. At the same time, regulators and consumers can see that sharing profits from EVs with rate payers would bring down average consumer price per kWh, and reduce the need for rate payers to fund EV infrastructure, because new outside capital can be raised thanks to new cash flows. And everyone should see the value in using more domestic fuels to power our cars. If electricity captured just 1 percent of the market share for ground transportation fuel, America would eliminate more than $5 billion in trade deficit. Bringing just 1 percent of the transportation fuel market to American suppliers would be like creating an entirely new <i>Fortune</i> 500 company – with fully domestic jobs.</p>
<p>There are many ways to capture new markets. It takes leadership from the top, in-depth analysis and planning around local market needs and situations, and real determination to make something happen. Few good things come easily or instantly. As any race car driver will tell you, around some corners you have to go slow in order to go fast around the whole track.</p>
<p><img alt="" src="http://www.fortnightly.com/sites/default/files/article_images/Rafi_FINAL-SM.jpg" style="padding-right: 10px; float: left; width: 125px; height: 156px; " /><img src="http://www.fortnightly.com/sites/default/files/article_images/Nora_Brownell_12_BW-sm.jpg" style="padding-right: 10px; margin-left: 4px; margin-right: 4px; float: left; " />
<p><i><strong>About the Authors: </strong>Rafi Musher is CEO of <a href="http://www.stax.com">Stax, Inc.,</a> a global strategy consulting firm that focuses on strategic, tactical, and advisory services. He also leads Stax’s Development Corp, providing turnkey solutions for complex energy initiatives. Nora Brownell is a former FERC Commissioner and founder of BC Strategies.</i></p>
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</div></div></div><div class="field field-name-field-import-deck field-type-text-long field-label-above"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even">EV Policy Dilemma</div></div></div><div class="field field-name-field-byline field-type-text field-label-above"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even">Rafi Musher, Stax Inc., and Nora Brownell, BC Strategies</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/ev4.jpg" width="400" height="255" alt="" /></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
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<a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/cash-flow">cash flow</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/ev">EV</a><span class="pur_comma">, </span><a href="/tags/evs">EVs</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a> </div>
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<div class="field field-name-field-intro-text field-type-text-long field-label-above"><div class="field-label">Intro Text:&nbsp;</div><div class="field-items"><div class="field-item even">Perverse policy signals are pitting utilities against the EV revolution. Will regulators give utilities the incentives they need to pave the way for electric transportation?</div></div></div><div class="field field-name-field-publishing-date field-type-datetime field-label-above"><div class="field-label">Publishing Date:&nbsp;</div><div class="field-items"><div class="field-item even"><span class="date-display-single">Thursday, May 26, 2011 (All day)</span></div></div></div>Thu, 26 May 2011 22:03:55 +0000meacott14577 at http://www.fortnightly.com